Good morning. Thank you for joining the Sherwin-Williams Company's review of Second Quarter 2021 Results and our outlook for the third quarter and full year of 2021. With us on today's call are John Morikis, Chairman, President and CEO; Al Mistysyn, CFO; Jane Cronin, Senior Vice President, Corporate Controller; and Jim Jaye, Senior Vice President, Investor Relations and Communications. This conference call is being webcast simultaneously in listen-only mode by Issuer Direct via the Internet at www.sherwin.com. An archived replay of this webcast will be available at www.sherwin.com beginning approximately two hours after this conference call concludes. This conference call will include certain forward-looking statements as defined under the U.S. Federal Securities laws with respect to sales, earnings, and other matters. Any forward-looking statements speak to only as of the date on which such statement is made and the company undertakes no obligation to update or revise any forward-looking statement whether as a result of new information, future events, or otherwise. A full declaration regarding forward-looking statements is provided in the company's earnings release transmitted earlier this morning. After the Company's prepared remarks, we will open this session to questions. I'll now turn the call over to Jim Jaye.

Thank you. And good morning everyone. Sherwin-Williams delivered very solid results in the second quarter. We continue to operate in a very dynamic environment where demand was robust across the majority of our business, raw material inflation remained persistently high and the effects of winter storm Uri continued to have an impact on the entire industry’s supply chain and product inventories. Amid these challenges we raised our sales expectations at our June 8 Analyst Day, and we delivered on those targets. Our gross margins were under considerable pressure in the quarter, given the sustained, higher raw material costs. However, as we have demonstrated in past inflationary cycles, we are fully committed to offsetting these costs and we announced additional pricing actions in the quarter, which will be realized as the year goes on. Despite the near-term gross margin compression, adjusted diluted net income per share in the quarter, grew by a double-digit percentage and EBITDA expanded by a high single-digit percentage. Let me briefly summarize the quarterly numbers. All comparisons in our prepared commentary this morning are to the second quarter of 2020, unless otherwise specified. Starting with the topline, second quarter 2021 consolidated sales increased 16.9% to $5.38 billion. This is the single, largest revenue quarter in the company's history. Supply chain constraints negatively impacted sales by approximately 3.5 percentage points split evenly between The Americas Group and the Consumer Brands Group. Consolidated gross margin decreased 320 basis points to 44.8% driven by raw material cost inflation outpacing our price increases near-term and a return to a more normal mix. Gross margin increased 10 basis points compared to the second quarter of 2019. SG&A expense, as a percent of sales, decreased 130 basis points to 26.7%. Consolidated profit before tax increased $71.8 million or 9.6% to $819.2 million. The…

Thank you, Jim. And good morning, everyone. Let me begin by framing my comments with some key themes. First, demand is very strong across the majority of our business, and we are aggressively pursuing growth opportunities. Two, while industry supply chain constraints are continuing to impact production and sales nobody has more assets and capabilities than Sherwin-Williams to keep their customers in paint and on the job. Three, we are aggressively combating raw material inflation with significant price actions across each of our businesses. We will continue to do so as necessary. And last, we've seen this movie before, there is no better or more experienced team in the industry to manage through the current environment. We remain extremely confident, we will emerge from these current challenges, a stronger company with stronger customer relationships and with continued strong value creation for our shareholders. My deep thanks goes to all 61,000 members of our team who are doing an amazing job in some pretty challenging circumstances right now. Jim did a nice job of framing up the second quarter at a high level. In a moment, I'll get into some additional color for each of our segments. But first, I'd like to make a comment on our first half. Given the impact of the pandemic on our results in the second quarter, a year ago, 2021 first half consolidated sales increased 14.7% or $1.29 billion. Adjusted PBT increased 23.5% or $303.3 million. Adjusted PBT margin was up 120 basis points to 15.9% of sales. And adjusted diluted net income was $4.71 per share, an increase of 26.6%. This is a very strong performance, especially in light of the much higher than anticipated raw material inflation we've seen and the supply chain challenges we've described. Now we turn into the segment performance…

Thank you. At this time, we will now be conducting a question-and-answer session. [Operator Instructions] Thank you. And our first question comes from the line of Ghansham Punjabi with Baird. Please proceed with your questions.

Thank you. Good morning, everybody.

Good morning, Ghansh.

Good morning. Revision higher for 2021 sales specific to TAG versus your most recent guidance, can you just take us through which end markets are driving that incremental upside? And I know you also said that [indiscernible] prices are not moderating, but have they started to stabilize or is that not the case at this point?

Hey Ghansham let me take a swipe at the first part of your question and I'll ask Al to talk about the second. And it's going to be an easy swipe across the first piece because across the TAG business, if I understand your question, which segments are going to be driving that business, it's every one of our professional segments. We've got great confidence in the demand that we see in that business. We spoke last quarter, last couple quarters about our expectations as it relates to DIY that they would likely revert back to the mean or the norm. And that from a market perspective, that we would be in a terrific position to be able to capitalize on the business as it started to shift into these pro segments. We didn't expect that it'd be perfectly smooth, just waving in from one to another. But in fact, these pro businesses are showing terrific demand and we're excited to be in a position to be able to capitalize on those. We think the control distribution model that we have, we think the reps that we have, and even in these challenges – challenging times with some of the supply chain issues, that we're working closer with our customers and developing a level of loyalty that we've not seen before. Before throwing it to Al, I'll add just a couple of comments as to why I made those statements regarding the relationship with our customers. We stay very close to our customers, and right now we've just gotten some terrific feedback on the research, as it relates to our loyalty with our customers. As it speaks to the pro business, we've set records during these challenging times with our contractors highlighting our ability to respond and work with them during these challenging issues. And the fact that our reps and managers are there with them close to the customer has allowed us to be responsive to them, keep them in paint predominantly better than anyone else. And that combined with the demand we feel is going to position us to really come through this and exit this stronger than are today and got you.

Thanks, Ghansham this is Al. On the raw material basket side, we are now saying that our third quarter is going to be the highest year-over-year. And that coming into the second quarter, we thought the second quarter will be higher year-over-year. So, a slight moderation there. But we also think the fourth quarter, we should see some moderation in raw materials. The costs are higher and industrial, but significant across all of our businesses. And that is why we were out with price increases across all businesses. We announced August 1 price increase in TAG, but we're out across all our businesses in all our regions to recoup this significant raw material inflation. And as you recall, we're going to see some short-term contraction and gross margin, but as pricing catches up with those raw material increases, we'll start to see a recovery. And then as raw materials, moderate, we'll start getting gross margin expansion going forward.

Perfect. Thanks so much.

Thanks, Ghansham.

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

Hi. Thanks very much.

Good morning.

Hi, good morning. I presume that there were raw material shortages that you endured in the quarter. Do you have an estimate of perhaps your lost sales because you didn't have sufficient raw materials? And when you think about your lost sales, how would you allocate it among the groups?

Yes, Jeff on a consolidated basis, we think the raw material shortages were a headwind of about 3.4% on the consolidated, and that was split pretty evenly between our TAG and our Consumer Brands segments. There was an immaterial impact on our Performance Coatings segment.

Thank you for that. And in Consumer Brands is that the area where it's – where your raw material, your price raw material capture is likely to be slowest?

Jeff, I think what – each of the consumer, each of the – we have a lot of different categories and businesses. I would say that the team has implemented pricing across all those categories, their price effectiveness is similar to where we're at in TAG, and there are more pricing that comes off that the additional raw material basket increases that we're seeing.

I'd say Jeff, from our perspective our actions are right in line. And in fact, our customers’ response is pretty much in line with what we've expected. We've always said that we don't try to run for the perfect quarter. We're working with our customers on both the TAG consumer, while in the PCG side on how these price increases roll in. We will get the price increase and our goal is to do that in a way that allows us to retain the customers. And to do that we work with them, but we have absolute confidence in our ability to do both of those two to put the price in and keep the customers.

Yes, the only other comment I would make on that, Jeff is on the lag, I think, if you look at the operating margin comparison versus last year, it's very difficult because of just the very high-volume strength we saw in the second quarter. But if you look at the first half our first half and consumer, our operating margin was still up almost 180 basis points versus the first half of 2019. So, I think because of the way the year rolled out, I think, a better comparison would be to the first half of 2019. And we've maintained that margin. And on a 3.5% sales increase in the first task versus first half of 2019.

Okay. Thank you so much.

Thank you, Jeff.

Our next question is coming from the line of John McNulty with BMO Capital Markets. Please proceed with your question.

Yes, thanks for taking my question. When we think about the various buckets for raw materials, whether it's resin, TiO2, or packaging, or what have you, I guess, as you look forward, are there ones where you expect to see relief? And can you speak to ones that you think look they are going to be sticky here for a while? Can you, can you help us to think about that?

Yes, sure John. When we look at the basket, what we saw in the second quarter was really the inflation was being driven by higher cost per monomer, resins, solvents, and packaging materials. As John mentioned, the inflation was highest in the Performance Coatings Group, given their greater exposure to that side. We did guide here that we think the third quarter is going to be the highest year-over-year, raw material inflation and only, modest relief maybe in the fourth quarter. So, I think a lot of those, that I just mentioned, are going to remain sticky. I'd say on the TiO2 side, that's been largely stable for the most part, a little bit of inflation, but not – that's not where we are seeing the pressure. So, it's going to continue to be a challenging environment on the raws. But as John mentioned and Al mentioned in their remarks, we're very committed on this pricing initiatives that we have. We've been very aggressive, we're out across the businesses. We feel very good about our ability to offset those dollars during the year.

I think if you look at historically where we've seen going back in time where the industry took a little bit of a delay in 2016 and the experience that we gained there, we've got a lot of leadership in this company that's been through that experience as well as others. And the determination that we have to stay ahead of there, I think, is visible right now, but the performance in our operating margins in Performance Coatings, reflecting the already aggressive actions that have taken place to offset that we're very committed to this. We're going to stay very focused and we believe we'll stay ahead of the pricing here.

Got it. Fair enough. And then maybe just as a follow-up, on the supply chain issues where either you lost some business, or couldn't meet the needs, or some of your competitors have, I guess, how should we think about the potential for share change? Is this something where you see it as temporary loss business or gain business, or is this something where it could be a little bit stickier? I guess, how should we be thinking about that as we look forward?

I think you should look at it as we're going to win share gain during this time that there might have been some transactions, some projects or some element of a project that we might have lost, but as I mentioned just briefly a moment ago, our research is indicating the way in which we're handling this. And maybe I'll talk just briefly about that, the transparency in which we're working with our customers, the responsiveness that we're working with, our customers there have been, as Al mentioned, a little bit of a challenge in dealing with some of these customers. But we have great confidence in how we're responding and how we're dealing with our customers that lead us to believe in the customer stats scores that we're getting from our customers really indicate the fact that the way we're handling this is allowing us to come out of this with greater stickiness. The new account growth that we're experiencing right now. So, record year-to-date performance in new account activity. And we're stepping into this with customers. While we're opening new accounts with them, we're getting them at this point to try new products, and that trial in itself, down the road will lead to more projects with those customers. So, I've got great confidence that as we come out of this, you're going to see that same coiled spring that we've exited other challenging times uncoil. And we're going to accelerate that. You can see that not only in what I've talked about in the research, but as our competitors continue to close stores and close territories, and we continue to invest in a number of areas, we're going to take advantage of this market. And we actually, as difficult as these times are, these are the best times for our company. We expect to come out of this stronger.

Great, thanks very much for the color.

Our next question comes from the line of Bob Koort with Goldman Sachs. Please proceed with your questions.

Thank you. Good morning.

Good morning Bob.

John, I was hoping you could help us figure out the math to get that mid-teens inflation cover. Could you tell us what your raw materials are as a percentage of your total cogs?

Yes, Bob raw materials are about 80% to 85% of our paint costs. I would tell you we need to get about a 50% price increase. 50% of the raw material increase to cover the dollars. And my expectation is that we will cover the raw material, increases dollar for dollar in the full year. A little bit behind in the first half, catch it up in the second half, but full year we'll offset, raw material increase dollar to dollar.

And then maybe dovetailing on John's question. I would guess as the largest paint company, certainly in North America, you did – were you able to leverage preferential supply relationships, so you had better availability, do you think than your competitors?

Well, we work closely with our suppliers. And I think the approach that we're taking here is that many of them are in unique situations as well. We clearly have worked with our suppliers to put ourselves in a position to leverage our supply chain, working with them in a way that can accelerate our ability to serve our customers. So, on the one front from incoming raw materials, we're working closely with them. We're unique in the fact that we have our own fleet of vehicles. We have 860 tractors and 2,100 trailers that we use to expedite once we receive these raw materials into our plants. And in many cases right now, right from our plants to customer projects. So, it's the entire the entire supply chain Bob that we're working on to expedite, cut out as many days as possible and to serve our customers. And that transparency as we communicate to our customers is exactly why I mentioned earlier. We know that we're going to come out of this with share gains.

Hey, Bob. The only other thing I would add to that is really utilizing our global scale, our footprint, our global relationships to look for additional supply opportunities because, we're investing capital to have an additional 50 million gallons of capacity coming online over the next few quarters and where the demand environment is it's well above where our initial forecast for raw material supply would be coming into the season. So, as we can get additional raw materials, we'll convert those raw materials faster. And as we come out of the third quarter into the fourth quarter, you can expect we'll be building inventory. And going into the first quarter, also building additional inventory to get ready for the next selling season in 2020.

Great. Thanks for the help.

Thanks Bob.

The next question will be coming from the line of Truman Patterson with Wolfe Research. Please proceed with your questions.

Hey, good morning, everyone. Thanks for taking my questions. First on Performance Coatings, you all suggested that raw material inflation will be heaviest in this segment. Could you just help us gauge the magnitude of inflation in PCG versus your mid-teens company inflation guidance? And specifically in Performance Coatings, I know you're taking actions pricing actions, but when do you expect to get kind of price cost neutral on a dollar basis in that segment?

Yes, Truman, we talked about mid-teens, our industrial businesses, depending on the business would be in the high teens, maybe low 20s and then seeing some moderation in the fourth quarter. To talk about the price cost dynamic, I think, it's important to look at the first half operating margin, because it's a little bit of a goofy year last year. I think the team has done a tremendous job maintaining their first half operating margin in a significantly higher raw material cost environment in the first half. And it's the highest in the company as we've talked about. And they are working well with their customers to keep up with the strong demand while having to implement the selling price increases to offset that raw material inflation. And when you look at our first half adjusted operating margin, it's down just 10 basis points to the first half last year and down just a 40 basis points to the first half of 2019. And you put this in perspective if you look, go back to 2016, through 2018 in a raw material inflationary environment, that wasn't as significant as we're experiencing today. And our industrial operating margins declined significantly from 2016 through 2018 on a pro forma basis, including a full year of Valspar and Sherwin Williams. And then as we saw selling prices increase, and they caught up raw material inflation and raw materials, moderate, we finally started seeing operating margin expansion – in 2019. I think what's important, you asked this question at our financial community presentation and Justin answered it the right way. We have been more aggressive in getting priced into the market faster and at a higher pace than, as we've seen this raw material inflation. And we are getting leverage on a stronger volume. So along with our continuous improvement mindset and other actions that we're going to be taking, it gives us confidence in getting to the high teens to low 20s as we come out of this raw material inflation environment. So, how long this inflation lasts will dictate somewhat how long it's going to take us to get back our operating margins, but we are in a much better position today than we were in a few years ago.

Okay. Okay, thanks for that. And then on the Consumer Brands Group especially, well in North America, I'm just hoping you can help us work through some of the moving parts there, the supply chain constraints which are impacting sales, you all have the divestiture, it seems like the pro side of the business is healthy in North America, consumer trying to understand how core DIY demand trended through the quarter and how it plays into your full year guide it seems like the, at least the deceleration in DIY should start to improve as we move through the quarter. Just trying to understand some of the moving parts there.

Yes, Truman, let me just comment that we expect that DIY would return to more normal levels as the year progressed. And we were very confident in the other segments, particularly in TAG within commercial and property maintenance would more than offset that slowdown. So, yes, we took our Consumer Brands full year sales guidance down just to mid-to-high teens while taking the Americas Group up from low double digits to mid-teens. And you are absolutely right when you look at the comparison year-over-year, our second and third quarters are going to be the toughest. Our fourth quarter is going to get slightly better, but I think it's important to look at it from an architectural market perspective. I think if you look at the combined architectural business, we expected the first half to be low double digits. And we were right there with our Consumer and TAG businesses. We've said we expected our second half to be up mid-to-high single digits versus last year. And with our TAG and CBG sales guidance for the full year, second half is in that range. So, from an architectural perspective, we believe we positioned the company strategically to take advantage of the different shifts in the market to position us to capitalize on those shifts. And plus, when you look at the return of growth industrial, we're just really excited about our full year sales guidance to be up high single digits, to low double digit in a really turbulent market.

Okay. Thank you, guys for the time and good luck in the upcoming quarter.

Thank you, Truman.

Next question is coming from the line of Arun Viswanathan with RBC Capital Markets. Please proceed with your questions.

Great. Thanks for taking my question. And yes, impressive results, I guess, in the face of the raw material inflation. So, I guess just, I wanted to ask about overall market growth. You continue to do really well in resi repaint and it's setting you up for, as you just noted, kind of high single to low double digits in TAG. So, I guess next year you will be facing a tougher comp there you will be facing potentially a slightly more achievable comp in DIY and consumer and performance as well. So how are you thinking about kind of ongoing sales growth in your business? I mean, are we still kind of thinking that Sherwin is in a position to grow one and a half to two times the market in TAG? And then maybe Performance is more in line with kind of industrial production and then consumer kind of settles back into kind of 3% to 4% DIY kind of range. How are you thinking about the different segments as far as growth kind of on a more midterm basis?

Yes, Arun let me take a quick swipe here and then I'll throw it to Jim to give you some macro numbers. I would say that we absolutely agree with the projected growth rates to continue to exceed the market. And I'll remind you, you use res repaint as the tip of the spear in your conversation. We've had now five consecutive years of double-digit growth in residential repaint, we don't see that slowing down. In fact, our expectations of Heidi and our TAG organization is to continue to accelerate that growth. We're making, we believe, some terrific investments in that business stores, reps, products our digital platform a number of areas there that we continue to invest. Yes, in the face of adversity in some cases, but as I mentioned earlier, that's what we believe helps us to accelerate during these challenging times, particularly given some of the moves of our competitors. So, we're excited about the growth opportunities there to accelerate. And maybe I'll throw it to Jim to just talk about some of the macro numbers across the business. But when I look at the professional segments inside our TAG business, we're excited about each one of those. And before Jim kicks off, you also mentioned the PCG side. We have very high expectations for Justin Binns and his team. We've got some really good momentum there. Our focus here, we believe is unique. We try to bring differentiated products and solutions to our customers. And we believe that the combination of the Valspar, Sherwin technology portfolio is really starting to allow us to harvest some of the great work both companies had done individually in a way that's very unique and that's clearly visible throughout the different segments. Particularly if you look at automotive as an example, where we know that we're beating the market with the combined technology that the two companies have brought together. So, the idea of consumer reverting back into low single digits is probably a good model number to use. But we absolutely believe that our TAG and PCG businesses will be outpacing the market.

Yes, to John's point about residential repaint, you think about that, I’ll remind you again, that that's, while it's our largest segment and TAG, it's also the space where we have the most opportunity to gain share. So, we feel really good about residential repaint. I think if you look at some of the market data, that's out there, it's very supportive. For example, existing home sales continue to be very strong. We look at the leading indicator remodeling activity that's accelerating into 2022. The remodeling market index is all time highs right now. So resi repaint no reason for us to think that that's not going to continue to be strong. On the new residential side, you are hearing news about labor and materials being a little bit of a governor, but, I think, that could have the effect of extending that cycle. And if you just look at the raw numbers on starts, they are still a lot very significantly year-over-year, both on single family and multifamily. You’ve got historically flattish mortgage rates and consumer confidence still strong in household formations that we always talk about. So, on the new resi side, very good. Commercial, just touching on that for a second, that was our second fastest growing market in the quarter. And as we’ve come out of COVID, vaccines are in place, people returning to work. Commercial has a lot of momentum right now, and you’re seeing other indicators like the architectural billing index, for example, that are very supportive. So, we feel very, very good there. Even property management, as people returning to travel, returning to offices, is up very nicely in the quarter. And then maybe to close out with the industrial business, we look at a lot of different indicators, as you know, there’s a lot of different divisions in that segment, but the manufacturing, the PMI is up in every region. We feel very good about that. And we’ve often said, in regions outside of the U.S. our opportunities are huge for market share gains. So, we feel very good about continuing to outgrow the market in TAG and in our PCG business. And as we’ve said, consumers probably going to start to return to a more normal environment.

But I would add, even on the consumer side, we are committed. We believe that we can help our customers outperform the market. So, while it might revert back more into a normalized run rate, we want, and we’ll be working in and investing with our customers to help them outpace that market. And we believe that we’ve aligned ourselves very well with our customers. They share that desire to continue to grow market share. And we’re investing in that business and believe that we can help them outpace the market as well.

Okay. Thanks for that. And then just as a quick follow-up, maybe I could ask on the capital deployment side. It sounds like you’ve completed some buyback activity, but that’s still going to be your main use of cash. Is that accurate outside of your internal investments? I.e., is the M&A environment still showing very high valuations that are not attractive, or maybe just comment on your uses of cash from here?

Yes, Arun. I think we’ve been very consistent in our capital allocation policy. As John talked about, the strong cash generation in the first half and the return of $1.9 billion to our shareholders in dividends and buybacks. And I think I want to make a point that we don’t need to make acquisitions. I think I talked about this on our financial community presentation. And you look at our growth from 2019 to 2020, we’ve averaged, that’s a 2.3% compounded average growth rate, or $800 million. And we grew adjusted PBT, $640 million, 77% flow-through. Our operating margin is up strong. And so, I would say, we don’t have a gun to our head. We’ll continue to look for opportunities, for M&A and that fits our strategy. But I think it’s important to note that we’ll continue to invest in our long-term organic growth opportunities. And I think that’s a great way to deploy cash. We talked about the architectural capacity improvements. We have packaging capacity increases coming and others, but I think we get more leverage on the organic growth than this just purely M&A, but absent M&A, we will buy our stock back in the second half.

And I think it’s a great response. And I also do want to put a little color on the M&A strategy that Al referred to. While we don’t feel as though we have a gun to our head, we do think that there are opportunities out there. And we think that there are several deals that we’re working on that could be completed this year, but they’re going to be disciplined deals that we can bring value to our shareholders. We’re not trying to be everything to everyone everywhere. We’re looking proactively for targets that as Al mentioned, fit our strategy, and those would be areas that would fill necessary geographic gaps. We’re not just throwing a dart at a map here trying to figure out where we’re not. We could bring technology that can be leveraged across the platform or could fill a void of other types to help us serve our customers. So, we absolutely believe that there are M&A targets out there that are a good fit that we can get at the proper value in fairness to the sellers and to our shareholders. And meanwhile, we don’t feel as though we’re out there just trying to buy a book of business so that we could demonstrate growth. We have growth opportunities and we’re actively pursuing those organically.

Thanks a lot.

Thanks.

Our next question comes from the line of Duffy Fischer with Barclays. Please proceed with your questions.

Yes. Good morning, fellas.

Hey, Duffy.

First question is just around raw materials and this spikes a little bit different than just a straight supply demand tightening with the freeze in COVID. Is this doing anything to change your strategy on how you want to source raw materials, either integrating upstream more yourself to do more of the resins, diversifying producers, diversifying geographies? Should we expect to see any meaningful change structurally on that side?

No, Duffy. We have a terrific and experienced team in both procurement and in technical, as well as our supply chain. And as you would expect with veterans that have 25-plus years of experience, we’re looking at a lot of things differently. I don’t know if that’s anything that we want to talk about right now. I don’t think structurally you have to be concerned from a capital standpoint that we’re changing the model of the business, but that you should expect and our customers should expect us to be thinking about how to protect them going forward, and we’ll be taking those necessary steps. But I don’t think that on a public call like this, we want to define what those steps are.

Fair enough. And then can you talk about both your ability and your customer’s ability to attract new talent to hire people as we’re growing into this, and then what you’re seeing on labor inflation?

Yes. I’d say we have seen a slight uptick in some wage areas, some pressure, where we feel that pressure. We’re taking the steps to secure what we believe to be our most important resource, our people. I’ll remind you that we have a terrific turnover rate between 7% and 8% on average. So, we recruit and hire the right talent. We train them, we give them the resources to win, and then they become the reason for our success and we’re very proud of our team. As a result of that and the fact that they have success in their career path, our people tend to stay. In fact, over a third of our employees have 10 or more years with the company and we think that’s very important. So, while we’re making some adjustments where necessary, we believe that they’re the right investments to make. And we do believe that as a result of this retention, we’re able to respond with experienced employees that can serve their customers. As far as the materiality of the moves that we’re making to respond to this pressure, I don’t think it’s material in the sense from a modeling perspective, but we are taking the steps necessary. And in some cases, making the financial moves to recruit and retain the talent that we need.

Great. Thanks guys.

Thank you, Duffy.

Next question comes from the line of Mike Sison with Wells Fargo. Please proceed with your questions.

Hey, guys. It sounds like the price of the paint can is going to be a lot higher this year and maybe the highest it’s ever been. Just curious, given how high the inflationary environment has been, if our materials do fall, why do you feel? But it sounds like you feel pretty good that that you’ll keep that pricing level and margins could expand really exponentially versus what we’ve seen historically. And then any worries that that the price of the paint can is – could cause some demand destruction given? I know it’s not the biggest part of a paint project, but just any thoughts there.

Mike, I think what’s important to remember is that the cost or the cost of the paint in a total project is a relatively small percentage, 80% to 85% of the painters’ costs is in their labor. And so, we’re moving and developing innovative products to help them offset that labor costs. And while many of them are able to hire and secure the talent that they need, many are bringing on new unskilled people in training them. And so, the cost of a good gallon of paint that can help them produce a nice finished product that their customers will enjoy, overall, it’s relatively small percentage of their cost of goods. So, they are responding I think favorably to higher quality products. And just a moment ago, I talked about our labor and our willingness to hire, recruit and retain that talent and in some cases paying a little bit more. And we have to consider that as well as our labor as well as our customers. We look at that cost of the retention that I just described, and that gets factored into all the pricing decisions that we make. Our painting contractors are doing the same. And so, we’re trying to offset some of their costs, the painters with higher efficient projects, through quality of products. And while we’re trying to do the same to our customers, as we’re experiencing some labor cost increases, we’re trying to offset that with efficiencies in our plant, in our stores to minimize the impact of labor in price increases that we’re out there seeking.

And Mike, we do believe we’re in a similar environment that we were facing in 2010 through 2012, where we had to implement six price increases in a 22-month period that offset the significant raw material increases. But we continued to invest in our long-term growth opportunities, adding 160-plus new stores, adding over 260 reps in our North America paint stores over that three-year period as well as other customer solutions. And we did see the benefit in top line and bottom line as raw materials moderated from 2010 through 2016. North America paint stores grew volume high-single digits, which was a multiple of the market, and segment operating margin grew over – almost 700 basis points. And on a consolidated basis, we grew by a high-single-digit percentage and EBITDA margin increased almost 500 basis points. We expect to see similar types of results as we come out of this, but I think the key there is we continue to invest. So, we’re willing to accept a little less leverage on SG&A, including in our second half this year. But I think it’s important that we show our customers that in good and difficult times we’re investing in their business to make them successful.

Great. Thank you.

Mike, I’m absolutely shocked that your first question wasn’t about the Guardian name. You let me down there. Thanks for calling.

Thanks, Mike.

Our next question is coming from the line of David Begleiter with Deutsche Bank. Please proceed with your questions.

Thank you. John, Al, on our last question, if you just go back to that 2010-2012 time period, did we retain the entirety of those price increases when raw started coming off?

Let’s say we retained the majority of them, David. As our customer base, especially you look at our largest segment, I’ll use an example of residential repaint. Cost of a gallon of paint is 10% of their costs. And once they get those costs into their bids, they can pass that on. And especially, as John talked about moving customers up to higher quality products. And we do see a trend when we’re in an inflationary environment that customers move to a higher quality product to get the benefits of the efficiencies, which way far outweighs the cost of that gallon of paint, even when you compare it to what they were using previously to the current product. So, we do expect to retain a majority of the price, not just on architectural, but also on industrial side of our business.

But I think the important metric that we track closely is our ability to help our customers make more money. So, in that process, our entire focus – when you look at the investments that we’re making, the services that we’re providing, every gauge that we have, every resource that we do, it always ends up with are we helping you make more money. And that’s an important metric in our decision-making.

Understood. And just on the price impact on the back half of the year, I think you gave us the expectation for TAG, but what are you expecting or how should we look at Consumer Brands’ and Performance Coatings’ price mix expectations in the back half of the year?

As we’ve talked about, David, it’s a little harder to kind of look at the different businesses because even within the different categories within consumer, but you would expect to see a similar, right, you would expect to see a similar range within Consumer and a higher range in PCG just because of the raw material basket being higher on our industrial businesses. And it’s just timing on industrial, as you know TAG is more uniformed and timing-wise when they go outprice, whereas in our industrial businesses by business by region are staggered across different timelines, but you could expect to see a higher cadence for our industrial businesses in the second half.

Got it. Thank you very much.

Thank you, David.

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

Yes. Thank you. Unlike some of your peers when this inflationary environment really started escalate, you made the decision to basically send the message to your pro contractors that you weren’t going to raise price for a few months. Was that decision to drive loyalty being that many of them had already won contracts and had a price assumption in those contracts and so forth? Was that part of that decision? And if so, do you think that it was successful? Do you think that you gained market share among that pro contractor customer base because of that decision?

Yes, with great certainty. And I would do that 100% of the time. I do it again tomorrow. And if we have to in the future, we’d likely take the same approach. Our loyalty and our ability to even execute the effective price increase with our customers increases dramatically as a result of that, so, without question.

And John, you also made a comment earlier about backlog from your contractors was robust. Can you quantify that? Do you have data that would compare that backlog today versus say where it was a couple of years ago? Is it meaningfully different?

We do. We have a CRM system that we use, proprietor we built and we do keep an eye on that. It is a very strong period in backlog and we’re not going to share any more detail on the specifics, but I speak with great confidence in the backlog.

Thank you.

You bet.

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

Thank you. John, in your prepared remarks, you made a comment that new account activity is up nearly 30% in the first half of the year. Can you elaborate on that? How does that compare to long-term historical averages, for example? And is there any way to translate that level, record level of new account activity into what it might mean for future volumes or future share gains, for example?

I’ll give you a little color. We’re not going to get into any specifics on the metrics or conversion, but I would tell you that it is a very high, very high number in comparison. I would say that our teams, our TAG leadership all the way through to those that are closest to our customers are doing a fantastic job. And one of the questions has to be how are you doing this given some of the shortages in raw materials. And the fact is, is that we’ve been very open with our approach compared to our competitors. And we were out early with transparency. I’d think many of our competitors were in denial. At first some of our competitors were asking, why no one else is telling me that. In fact, some of them said it might be a week or two. And we were out with very truthful with our customers as to what we expect. And I give our procurement team and our supply chain team great credit for the courage that it took to come in to this boardroom that we’re in today and explain how this was going to fall out and how quickly our commercial teams took that to the market, face-to-face with our customers with full transparency to help them run their business. And the reason that I say that and why I think that’s important is that while many of our competitors were in this denial and may have felt that they were going to be at a competitive advantage for whatever reason, ultimately from a customer’s perspective they lost credibility. And our teams now are out talking to customers who may in the past have had loyalty that kept them from using other suppliers. Suddenly we’re getting – the phones…

Thank you for that. My second question relates to Performance Coatings. If we look across the major categories there, packaging, wood, coil, refinish, general industrial, et cetera, can you give us a sense for which of those businesses have grown the most versus pre-pandemic levels and which might remain the most depressed, such that you have more potential for rebound going forward?

That’s a really interesting question. I’d say that the way I might answer that is that we see terrific growth in all of them. If I may, I could just spin through those quickly. In the packaging business, we do believe that the unique technology that we’ve brought to market will help us to continue to grow. Al mentioned the CapEx that we’re putting into this business. We are investing along with our customers in additional capacity, and we think that our V70 is a very unique product. It’s a plug and – a product with plug and play performance. It’s easily adopted onto existing can-making equipment and helps our customers with speed. So, the efficiency of the application is terrific. It gives great flavor protection to products, both food and beverage, and it’s really the next generation of the non-BPA technology. So, it’s – and I’m taking packaging first and getting into a little bit more depth because while it’s easy to talk to that model, it’s the same model that we’re using in every segment to help differentiate our teams from our competitors. So, when you look at GI as an example or industrial wood, we’re looking at not only the technology, but the supply chain, how do we take – the time that it takes to get product and whittle that down to what might have been weeks into days. And instead of thousands of gallons of required orders to 50 gallons or 100 gallons to put them in business faster with less working capital. Our coil businesses are doing a fantastic job of introducing technology and speed. Our automotive, I talked earlier about the combined technologies between the Sherwin and Valspar technology. That’s helping throughput with each of their customers to be able to be more productive. In our protective and marine business to get assets more – I’m sorry, to get assets back in play faster. So, when you asked that question, quite honestly, it’s hard to answer which offers the greatest opportunities. If Justin Binns was in the room with me right now, I’d look him in the eye and I’d tell him I have expectations for every one of those businesses to grow and grow excessively and at the expense of our competitors. That’s what I would tell them.

Thank you very much.

Thanks, Kevin.

Our next question is from the line of P.J. Juvekar with Citigroup. Please proceed with your question.

Yes. Hi, good morning or good afternoon, I should say.

Hey, P.J.

And I’m looking at the industrial businesses so far of two of your competitors and their margins are much lower. Your margins kind of held up. And I’m sure you’re presumably impacted by the same shortages of raw materials like epoxies and isocyanides. Is your impact likely to be delayed into 3Q or are there other factors that offset your raw material impact?

I think I’ll start and maybe turn it to Al if I miss anything. I think part of it is mix of business. We’ve been very selective in our strategy on what we pursue. And we pursue businesses that are interested in coatings and solutions that will help them make more money, not necessarily just commodities. So, you’re not going to see us in areas where it’s just that commodities. So, we’ve actually walked away from some of those businesses and we’ve focused on areas that are more high value. So, we often talk about bridge and highway, you’re going to see us on the high-value bridge area as an example as opposed to other areas that are just low-margin commodities. And I think that plays an important part in the alignment and our approach is just that. We want to be partners with our customers, help them to be more successful. And in return, they understand that our ability to serve them and make them successful comes at a cost to us and our shareholders and we’re sharing that reward. Al, anything else you’d like to add to that?

The only thing I would say, P.J., is we would expect to see sequential improvement in our Performance Coatings segment operating margin through the second half. Even though we’re going to go up against a tougher comp second half versus the first half, it’s still we’re seeing strong volume as our sales return to a more – what I would say a more consistent or normal levels quarter-to-quarter. So, our full-year sales guidance of up low 20s percentage implies that back half in the high teens. We talked about the third quarter being up high teens to low 20s. So – and it’s about the strong volume getting leverage on SG&A, but it’s also the commitment that this team has made to getting price into the market timely and aggressively to offset those raw material – that raw material inflation. And like I said earlier, this is not – we learned a lot in 2016, 2017, 2018 that, that this team is now delivering on and executing from that learning. So, I think we’re doing a great job.

I’m not going to revisit that.

No.

Great. Great. And then my second question is, can you talk about your digital efforts that may have accelerated through the pandemic? How much of your contractor customers are ordering online and getting the paint delivered to the job site? Thank you.

Yes, I’d say that we’re seeing strong utilization and I would say an increase in all the metrics in the categories that we track. And the platform, I’d say, is providing a service option that makes our pros more efficient in utilizing all our resources. So unlike others who might be trying a digital platform as the model, ours is unique and that it brings everything to bear. So, we want our customers utilizing our stores, our reps, and the platform and we believe that the model that we have is very unique and how it encapsulates all of that into one offering. This platform that we – so we’re not going to talk specifically about sales on platform – on the digital platform versus in the store or by phone or through the rep. Quite frankly, we don’t discriminate against any of those orders. We’ll take them all. We want them utilizing any resource every platform that they feel as comfortable. What we’re trying to do is make it easier for them. So, this digital platform will allow them access to their pricing, their projects, their orders and they can conduct business with us 24/7 through the platform. And if they prefer to come into the store and have a cup coffee with their best friend behind the counter, we encourage that as well.

Thank you.

Thanks, P.J.

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

Thank you. John, on the Guardians, I don’t think Cloverdale/Rodda uses the Guardian brand at all in Ohio, so maybe there is an opportunity there.

Yes. There might be. I don’t know about that. Only that where do the Guardians go, John? Now, they came from John Roberts, not John Morikis, everyone.

Okay. Is it unusual in the June quarter for interior to be larger than exterior? And was that a mix headwind in the quarter since exterior is typically more expensive than interior?

No, John, I would say kind of that mix return to a more normal level. I think typically we start off interior and exterior maybe 4 to 1 in the out quarters, where the exterior in the Midwest and East are less prevalent. And then as you get to the two middle quarters, it trends to closer to 3 to 1 to 2.5 to 1. And I think we ended the quarter closer to 2.5 to 1 on volume.

Okay. And then trucking constraints were cited as a big headwind by some of your competitors. Were you able to use the trucking fleet in many different ways here to help mitigate the shortage of that? I know you pick up some of your raw materials that you distribute, but I don’t know if you’re able to pick up other raw materials and somehow mitigate freight as an issue?

Yes, we were. And we plan to continue to use them as creatively as possible, just as we do every asset. And John, this has given us an opportunity and we have a terrific leader in Joe Sladek that runs our Global Supply Chain, whose team has been really creative. So, it’s not just the tractors and trailers, which is a great question that you’re asking, but we’re using our distribution centers or that manufacturing, our stores, everything in a very unique fashion. And some of this has been on the fly and we’ve continued to improve in our ability to do that. And again, we’ll come out of this better as a result that we’re learning a lot about our supply chain and our ability is to be able to leverage it. And we’ll will be better coming out of this as a result.

Okay. Thank you. Nice quarter.

Thanks, John.

Our next question is coming from the line of Mike Harrison with Seaport Research Partners. Please proceed with your questions.

Hi, good afternoon. I was wondering if you could talk about the consumer strength that you were seeing in Europe and Asia. Is that a product of DIY remaining stronger for longer in those regions or were the comps easier? I also know that you’ve made some changes in your strategic approach to those international markets, but maybe comment on what you’re seeing in terms of demand trends internationally in the consumer business.

John – I’m sorry, Mike, I did say that it’s a little bit of everything. Certainly, the region particularly in China, if you look at the double-digit decline in 2000 [ph] largely related to COVID, it had an impact on us. I will point out that we did improve profits, even in that kind of environment. So, in China, we continue to focus on the volume growth with the recovery further defining our operating model in that region. We had a strong half in 2021. We’re not going to give guidance by business, but this is, as I’ve said before, an area that we’re looking long term. I wouldn’t suspect that next quarter this business is going to move the needle one way or the other. But if you look next decade, it might. And so that’s the way we’re running this business and we have expectations for Brian Padden and his team to continue to really drive through the strategic decisions that we’re making there. And we’re looking long term there. In Europe, I’d say we continue to build around our Kingfisher relationship. The team in Europe has delivered a double-digit increase in 2020, so comparisons are a little bit more challenging here in 2021. And we did have a very strong start in 2021. We have terrific leaders here in Europe, one of whom we just brought to the U.S. to take a very important role for us. He did such a wonderful job there and very strong leader. And again, speaks to the depth, we have a leader who is going to backfill him, that’s very strong as well. So, I think both of these businesses are relatively small in nature, but good opportunities for us and we’re managing accordingly.

All right. Thanks. And then I also wanted to ask about inventory levels at big-box retailers. If we were able to look at the point-of-sale data, is that pretty similar to what you’re seeing in terms of the consumer business revenue decline? Are you seeing retailers still working to restock or is there actually some destocking happening as the DIY demand is normalizing?

Mike, I’d prefer that our customers talk to their plans as it relates to inventory. I will say that we are working hard and will be working hard to the balance of the year to continue to improve our ability to serve them. So, it’s a very important focus of ours. Al mentioned the incremental investments that we’ve made to bring on about 50 million gallons of capacity. That certainly will help this business as well. But as it relates to their inventory decisions and what they do, I don’t know that, that’s appropriate for us to comment on. But I would tell you that we’re working hard to be able to continue to improve our position with them should they decide to pull in more inventory going forward.

All right. Thanks very much.

You bet.

Next question is coming from the line of Vincent Andrews with Morgan Stanley. Please proceed with your questions.

Hi, thanks. Just – point, in the past you’ve talked about equipment sales in the stores business as a potential indicator of backlog. Is that trending in line with your expectations or is anything reflecting in that?

Yes, it is double-digit growth. We speak – we think it speaks to the confidence that our painters have. So, we’re excited about it. Yes.

Okay. And actually just – any issues with any customers coming to you about labor availability, the season just given kind of hearing that across the board, or anything with the painters?

Yes, I’d say labor continues to be a discussion in nearly every market that I’ve been in. As Jim mentioned in one of his responses, we feel as though that is serving as a bit of a governor. And I’ll point out that while labor is an issue, I believe every professional segment in TAG had a double-digit gain. So, they’re finding a way to continue to grow but it is an issue. And again, all of these challenges, all of this adversity, we don’t ask for this adversity, but it does play to our advantage. It does allow us to serve our customers in a way that helps them through these challenges. If they run short on people or have to move from one project to other – another, any of that turmoil on the part of our customer, please write to the rep that’s there, working with that customer or the store manager locally that has the capability to serve that customer. So labor is an issue. It’s one of many and we try to work with our customers in a way that can help them make more money working through it.

Appreciate it. Thanks very much.

You bet.

Next question is from the line of Greg Melich with Evercore ISI. Please proceed with your questions.

Hi, thanks. My question was on the comp sales trend. If you look at the deceleration, I think it was from 16% to your – to around 12% in the second quarter, is that really all just the supply availability of raws? Was that the main reason for the deceleration?

You’re talking on TAG, Greg, correct?

Yes, talking on TAG, specifically, the two-year stack.

Yes, I think part of it is we’ve had a tougher comp. If you look at our – if you look at the way our 2019 unfolded, we kind of had a better second quarter. And then when you look at the way we had 2020, we had headwinds in the second quarter. Yes, we talked about a 3.4% headwind in raw material availability in our second quarter that impacted us. So, it’s kind of a – I hate to use the term wonky, but the way the two-year stack came out, it was kind of a little bit wonky. And you look at two-year – first half 2021 versus first half 2019 up 14%, and some prices for that, but it’d be primarily volume.

Got it. So then maybe the second, the follow-on to that is if we look at your guidance, it looks like you’re expecting that two-year trend to reaccelerate maybe not all the way back to 2016, but get back a couple of 100 basis points so then stocks get better and as pricing goes through, is that fair?

Yes, there is that and I think if you looked at it on the pro segment would even be a little bit better

Yes, we expect to gain share.

Got it. That’s great. Thanks. Good luck, guys.

Thanks, Greg.

The next question is from the line of Adam Baumgarten with Zelman & Associates. Please proceed with your questions.

Hey, thanks for taking my question. Just one quick one from me. Just if you look at your commercial business in TAG, can you maybe walk through some of the kind of end market verticals and what was strongest, what was maybe still struggling, that would be helpful?

Yes, I'd say we're seeing strength in quite a few areas. The hospitality area, schools, tilt-up, warehousing is really going well. Trying to think of areas that are really soft. Nothing comes to my mind, truly in areas that are really soft, I'd say, they're all growing in – lot of tilt-up, lot of warehousing, lot of expansion, medical, healthcare is expanding, some just more than others, Adam.

Got it. Thanks. Appreciate it.

Yes.

Our next question comes from the line of Garik Shmois with Loop Capital. Please proceed with your questions.

Great, thanks. Just one from me. Just, are you seeing any early signs of the impact of the Delta variant, any change in how homeowners are inviting in contractors or pro painters?

No. Our res repaint business is – it’s really hot and we’ve not seen that at all.

Thank you.

You bet.

Our next question is from the line of Eric Bosshard with Cleveland Research. Please proceed with your questions.

Thank you. Two things. First of all, that to your consumer growth improves in the second half somewhat notably relative to the second quarter, what’s different in the second half in that business or what was more of a drag in 2Q that doesn’t persist in the second half?

Yes, Eric. I think the raw material availability impacted us when I said evenly – 3.4% on a consolidated, pretty evenly on a dollar that does impact consumer a little bit more. So, we’d expect to see a little bit better progress or a little less headwind there. As they’re chasing raw material cost pricing and higher pricing in their second half or our second quarter will be realized. And I think what we expect as we bring more capacity on and we get more raw materials, we’ll be able to supply our customers in a better fashion.

Okay, thank you. And then secondly, John, you talked about price leadership in stores and great not surprising to see that. The question is in regards to realization. Seeing it’s a unique period of inflation with raws, can there be a path to upside realization on these price increases relative to the historic amount of realization or does the realizations schedule look like it has in years past, even though it’s a different period of time?

Eric, it might. I mean, I’d say, our approach to the pricing has been very well received by our customers and the response that I said earlier about 100% of the times I would do this exactly as we rolled it out. So, it could, but there is also a lot of pressure in the market right now. So, what we’re trying to do is put our teams in a position to be able to serve their customers, to help facilitate that price effectiveness. And we’ll see. I mean, we’re going to work hard at it, but I can’t with 100% certainty tell you that I could project that number. I could tell you that we’re working very hard to work with our customers to help them to be successful and in turn, our shareholders are rewarded. That’s our model.

Great. Thank you.

You bet.

Our next question comes from the line of Kevin Hocevar with Northcoast Research. Please proceed with your questions.

Hey. Good afternoon, everybody. On the – Al, I wanted to revisit – I think you had mentioned that you have an expectation of price cost to be neutral for the full year with tailwinds in the back half offsetting the headwinds in the first half. Given the inflation you’re expecting in 3Q and kind of the timing of pricing phasing in, is the third quarter still a drag on that or you’d expect that to get to neutral and kind of basically all the benefits coming in the fourth quarter? Or how do you expect that to kind of phase in? And then I guess I just wanted to reconcile those comments with – I believe you guys also mentioned that gross margins in the back half of the year should be – you expect those to be weaker than the front half. So why would that be given if price cost should be a nice tailwind in the front half versus the headwind in the – sorry, nice tailwind in the back half versus the headwind in the front half?

Yes, I think, Kevin, you will start getting on top of it in the third quarter, not only in the TAG price increase that was announced, but across all the businesses in segments. We’ll start getting on top of it and then pick up more ground in the fourth quarter. The comparison gets much more difficult in our second half, if you look at adjusted gross margin in our first half 2020 was 46.9%, it grows to 47.8% in the second half. So, you have that headwind. And also, you have our customer mix. As I talked about before, when we look at the combined architectural businesses, DIY starts returning to more normal levels, and a question last year I answered, that was about a basis – 100-basis points impact on our last year numbers that we saw. More so starting in the second quarter, but more so in the second half that as that returns to more normal, that’ll be a headwind. So that’s why you don’t see as much traction as you would think in our second half on gross margin.

Okay. That make sense. And then the sales that are – you mentioned that we’re lost to 3% – 3.5 or so percent in the quarter, do you view those as deferred that could be made up in future periods or do you view those more as being lost?

Yes, believe they’re deferred. I think the projects are there. John talked a lot about the demand and the strength we’re seeing there across all the segments. So, I think the teams in the field are working very closely with our customers and moving products around, but I think that’s deferred, not lost necessarily.

Okay. Thank you.

Thanks, Kevin.

Thank you. We’ve reached the end of our question-and-answer session. I will turn the call over to John Morikis for closing remarks.

Yes. Thank you. And first, let me just start by reminding everyone that Jim and Eric will be available for the rest of day and tomorrow if you have some questions. I did ask for the opportunity to close out today’s call just to pull out a couple of really important points, at least in my mind. First, that we’re really proud of the terrific first half that we’ve had, but we’re not complacent. This isn’t an organization that pops corks over what’s happened. We’re more focused on what has to happen. So, we’re determined to continue to get better, but we’re really pleased with the first half. So, I want to thank our teams for the wonderful work that they’re doing. We are in a strong market with terrific demand and our goal is to outpace that demand in the market with growth that exceeds the market’s position. We do believe we’re positioned to capitalize on this demand, wherever it presents itself. I mentioned earlier about the utilization of our assets, if it’s our factories, our stores, our reps, our digital platform, the fleet that we talked about, we do believe we’re uniquely positioned and very determined. We are experiencing these raw material cost increases from an industry-wide availability issue and we think that this team of leaders that we have who have been experienced with similar cycles, it may have been natural disasters or financial crisis, COVID, whatever it might be, now here with raw materials that this seasoned and experienced team knows what to do and have the conviction to do it and we’re proud of them. All of this has us confident in our ability to come through this with greater market share, as I mentioned earlier, stronger relationships and better positioned for future growth. And so, we’re excited. This is a challenging year, but we’re excited about our position and our ability to leverage this challenging year in the shareholder value and growth for our company. Lot of determination to do it. So, thank you all for your interest in our company, know that where we’re out here determined to do better and convinced that we can. Thank you very much.

Thank you. This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.