Good morning. Thank you for joining The Sherwin-Williams Company’s Review of Third Quarter 2020 Results and our Outlook for the Fourth Quarter and Full Fiscal Year of 2020. With us on today’s call are John Morikis, Chairman and CEO; Al Mistysyn, CFO; Jane Cronin, Senior Vice President, Corporate Controller; and Jim Jaye, Senior Vice President, Investor Relations. 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 only as of the date on which such statement is made and the company undertakes no obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. A full declaration regarding forward-looking statements is provided in the company’s earnings release transmitted earlier this morning. After the company’s prepared remarks, we will open the session to questions. I will now turn the call over to Jim Jaye.

Thank you, Rob, and good morning, everyone. I hope you and your families are remaining safe and healthy during the pandemic. Let me begin with some high-level summary comments on the quarter. All comparisons are to the third quarter of 2019, unless otherwise stated. Sherwin-Williams delivered outstanding results in the third quarter. Total company consolidated sales were well above the original guidance we provided on July 28, and also slightly above the increased guidance we provided on September 29. We saw continued unprecedented demand in our DIY business during the quarter, double-digit growth in residential repaint, very solid demand in new residential and positive momentum across our industrial end markets. We delivered year-over-year improvement in gross margin and record profit before tax EBITDA, diluted net income per share and net operating cash. Third quarter 2020 consolidated sales increased 5.2% to $5.12 billion, inclusive of a negative currency impact of 0.9%. The estimated impact from COVID-19 on consolidated sales in the quarter was not material. Consolidated gross margin increased 220 basis points to 47.9%. Consolidated profit before tax increased $165.8 million or 23.4% to $875.6 million. Diluted net income per share increased 24.4% to $7.66 per share. The third quarter of 2020 included acquisition-related amortization expense of $0.63 per share. The third quarter of 2019 included acquisition-related amortization expense and other adjustments of $0.49 per share, as described in the Regulation G reconciliation table included in our press release. Excluding these items, third quarter adjusted diluted earnings per share increased 24.7% to $8.29 per share. Adjusted EBITDA increased $185.7 million to $1.11 billion, or 21.6% of sales. Net operating cash increased 54.3% year-to-date to $2.56 billion. From a segment perspective, sales in the Americas Group and Consumer Brands Group were in line with our updated guidance, while sales in Performance Coatings Group were slightly better than expected. All segments delivered very strong flow-through in the quarter. Segment margin in the Americas Group improved to 25.1% of sales, resulting from operating leverage on the top line growth, favorable mix, and lower input costs. Adjusted segment margin in Consumer Brands Group increased to 26.4% of sales, resulting from operating leverage on the strong double-digit top line growth, favorable product mix, lower input costs, and actions taken over the past year to improve our international operating margin. Adjusted segment margin in Performance Coatings Group increased to 16% of sales, driven by returning sales growth and lower input costs. Additional details on our segment performance are included in the slide deck provided with our press release and available on our IR website. Let me now turn the call over to our Chairman and CEO, John Morikis, for some additional commentary on the quarter and our outlook. John?

Thank you, Jim, and good morning everyone. Let me begin by expressing my appreciation to the over 61,000 employees of Sherwin-Williams for their continued determination and resilience. I could not be more proud of this incredible team as they delivered record results in a very challenging environment. Our leadership team and their many years of collective experience have been true differentiators throughout this entire year, enabling us to drive significant improvement across many measures while serving our customers at a very high level. We generated very solid sales growth in the quarter, with all three operating segments growing year-over-year, exceeding the original guidance we provided at the end of July and improving sequentially. The gross margin expansion in the quarter was driven by sales growth, effective pricing, favorable mix, and lower input costs. The industry basket of raw materials was down by a mid-single-digit percentage in the quarter compared to the prior year, though a bit less than what we saw in the second quarter. SG&A as a percent of sales in the quarter decreased slightly year-over-year to 27.5%. SG&A increased on a dollar basis as we continue to make investments to drive long-term growth. Let me talk a bit more about trends we're seeing in each of our segments before moving on to our outlook. In the Americas Group, we saw a significant sequential improvement from the second quarter to the third quarter in all regions and all segments served. Most regions and segments also delivered growth in the quarter on a year-over-year basis. We're especially encouraged by the return of double-digit growth in residential repaint, our largest segment. Interior work has picked up significantly. As a reminder, this segment has been our fastest growing over the last several years and continues to offer us the largest opportunity for share gain. Sales in new residential also gained momentum in the quarter, and were up by mid-single digits. Our DIY business delivered the biggest year-over-year percentage increase in the quarter, with COVID-related stay-at-home projects driving robust consumer demand throughout the quarter. Our customers' business slowly improved but remained down low single digits in the quarter. Our customers are telling us that job site conditions are stabilizing, and the predominant theme remains that projects are being delayed rather than canceled. The property maintenance segment remains under pressure as turnover in multifamily remains slow. Protective and marine remains our most challenging segment from a demand perspective. Access to job sites remains an issue on some projects. Demand remains particularly depressed in oil and gas, which is the segment's largest single-end market. Other areas such as flooring and water and wastewater treatment are moving in a more positive direction. We believe this business is well-positioned to take advantage of future potential infrastructure investments and comps will start to become more favorable heading into next year. From a product perspective, strength in exterior paint continued as we generated low double-digit percentage growth in the quarter. Encouragingly, we also saw a significant pickup in interior paint, where sales were up by a high single-digit percentage overall and by double digits in the residential repaint segment. Additionally, spray equipment sales were up strong double digits in the quarter. This is another very encouraging sign of recovery as contractors are unlikely to invest in this type of equipment unless they anticipate significant demand. Pricing came in as we expected and was approximately 2% in the third quarter. We expect a similar level of effectiveness in the fourth quarter. We opened 24 new stores in the third quarter and 40 year-to-date in the U.S. and Canada. We anticipate opening a total of approximately 55 new stores for the full year in the U.S. and Canada. Along with these new stores, we continue to make investments in sales reps, management trainees, innovative new products and productivity-enhancing services to drive additional growth. We're also pleased by a continuing uptick in the use of our e-commerce platform. Moving on to our Consumer Brands Group. DIY demand remained robust in the quarter, driven by consumers continuing to focus on home improvement projects while nesting at home during the pandemic. We generated strong double-digit growth by working closely with our retail customers to capture this demand, most notably with Lowe's. Our global supply chain organization continued to perform admirably in the quarter, working collaboratively with our customers to help meet unprecedented demand. Internationally, every region generated year-over-year growth. Sales increased by double-digit percentages in Europe and Australia, and by a mid-single-digit percentage in Asia. Similar to the second quarter, we leveraged the strong sales growth and favorable product mix to drive significant operating margin improvement compared to the prior year. Our margin improvement also reflects the terrific work this team has done over the last two years to improve our portfolio, including rationalizing SKUs, exiting the ACE private label business, and reducing costs in Europe and Australia. We continue to reinvest in this business to drive long-term growth for our partners, especially in the handyman remodeler or pros who paint category. Lastly, let me comment on the trends in the Performance Coatings Group. We're encouraged by this segment's return to growth in the quarter, inclusive of a 1.4% headwind related to currency translation rate changes. As in the Americas Group, Performance Coatings Groups generated significant sequential improvement from the second quarter to the third quarter in all regions, in nearly all divisions. The majority of regions and divisions also delivered growth in the quarter on a year-over-year basis. From a regional perspective, Asia grew fastest in the quarter, up by a high single-digit percentage. Europe and Latin America both grew by low single-digit percentages. Our largest region in PCG, North America, was down in the quarter by a low single-digit percentage, where a slower recovery in the General Industrial Division offset growth in the other divisions. From a divisional perspective, I'll start with our packaging business, where our team continues to deliver great results. Sales were up high single digits and positive in every region for the quarter. Demand for food and beverage cans remains robust, and our non-BPA coatings continue to gain traction. Both we and our customers are investing in capacity expansion. In coil coatings, the resumption of selected commercial construction projects, albeit slow, along with growth in appliances and strong new business wins across all regions led to mid-single-digit growth in the quarter. We're very encouraged by the improved performance in industrial wood, where sales were up by a mid-single-digit percentage in the quarter. We believe the momentum we are seeing in kitchen cabinetry, flooring, and furniture correlates to similar positive trends in new residential construction. We also returned to growth in automotive refinish in the quarter, where sales were up a low single-digit percentage. This team has done a very nice job driving new account growth by offering better solutions than our competitors. We estimate miles driven are currently at about 75% of pre-COVID levels. And collision shop volume across the industry is off by approximately 25%. We expect continued improvement in these trends. In general industrial, we were down by a low single-digit percentage in the quarter. While we’re never pleased with a quarter where the top line is down, this was a very significant improvement from the high double-digit decline we saw in the second quarter. There are several reasons for optimism in this business. Regionally, Asia was up double digits, and Europe was up mid-single digits in the fourth quarter. Latin America was positive on a currency-neutral basis, and while North America remained under pressure, we did see very meaningful sequential improvement. Moving on to our guidance. I'll remind you that our fourth quarter is a seasonally smaller one. We expect to see our normal sequential seasonal slowdown in U.S. architectural demand in the fourth quarter, similar to previous years. We're expecting continued favorable product mix in the quarter with DIY, res repaint and new residential growth, while not expecting material improvement in the other architectural segments or Protective & Marine. We also expect our interior products to become a bigger part of the mix in the quarter as we return to a more typical interior/exterior ratio for this time of year. On the industrial side of the business, we're encouraged by many of the positive trends I described a few moments ago. At the same time, dynamics related to customers' replenishment of inventory and the true pace of end market demand will likely cause continued choppiness in the pace of recovery in some end markets. Against this backdrop, we anticipate fourth quarter 2020 consolidated net sales will increase by 3% to 7% versus the fourth quarter of 2019. Looking at our operating segments for the fourth quarter. We anticipate the Americas Group to be up by 4% to 6%, Consumer Brands Group to be up a mid-to-high-teens percentage and Performance Coatings Group to be up or down a low single-digit percentage. For the full year 2020, we are revising our sales guidance upward from flat to up slightly, to up by a low single-digit percentage based on our improved fourth quarter outlook. On an operating segment basis for the full year, we anticipate the Americas Group to be up by a low single-digit percentage, Consumer Brands Group to be up by a mid-teens percentage and Performance Coatings Group to be down by low to mid single-digit percentage. We expect to see gross margin expansion in the quarter. On SG&A, we will be making incremental investments in our long-term growth opportunities, and we do not expect to see as much SG&A leverage as in our third quarter. We are again increasing our diluted net income per share guidance for 2020 to be in the range of $21.49 to $21.79 per share compared to our most recent guidance of $20.96 to $21.46 per share and compared to $16.49 per share earned in 2019. Full year 2020 earnings per share guidance includes acquisition-related amortization expense of approximately $2.51 per share. On an adjusted basis, we expect full year 2020 earnings per share of $24 to $24.30, an increase of 14.3% at the midpoint over the $21.12 we delivered last year. Embedded within our outlook is the assumption that the raw material basket will be lower for the full year by a mid-single-digit percentage. Based on our current outlook, we expect the fourth quarter will have less of a benefit than the first three quarters of the year, given recent sequential inflation in some commodities, compared to the deflation we saw the latter half of 2019. Let me close with some additional data points and an update to our capital allocation priorities. Our CapEx guidance for the year remains $280 million. This CapEx guidance includes a very modest amount of spending related to our new headquarters and R&D facility projects. Earlier this month, the company's Board of Directors approved a dividend of $1.34 per share, an increase of 18.6% over the $1.13 per share dividend paid in the fourth quarter of 2019. We resumed open market share purchases during the third quarter, investing $404 million, purchasing 600,000 shares of company common stock. Absent significant M&A, we expect to continue purchasing shares in the fourth quarter. As I mentioned in my opening remarks, we have a remarkable team at Sherwin-Williams, and they delivered outstanding results in the quarter by focusing on meeting customer needs. I'm truly grateful for their passion and their commitment, which has put us on track to deliver sales and earnings growth in this most challenging of years. We believe the long-term fundamental strengths of our end markets remain intact. There is tremendous opportunity in front of us in every one of our businesses, and in many ways, we're just getting started. We remain very confident about the future and our ability to create shareholder value over the long term. This concludes our prepared remarks. And with that, I'd like to thank you for joining us this morning, and we'll be happy to take your questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Ghansham Panjabi with Baird. Please go ahead with your question.

Thank you. Good morning everybody.

Good morning, Ghansham.

I guess, first off, within TAG, the commercial and property maintenance sub-verticals improved significantly, relative to what you saw in 2Q. How do you disaggregate that improvement between pent-up demand from the 2Q dislocations versus an improvement in underlying growth? And then what time line do you think for each vertical is it reasonable for volumes to inflect higher year-over-year?

Thank you for your question, Ghansham. Starting with the commercial segment, jobs are reemerging as you indicated, and we've noticed sequential improvement. The ramp-up will largely depend on how quickly our contractors can deploy more painters to projects. The challenges brought on by social distancing and related restrictions have made things difficult for our customers. As we approach 2021, we anticipate continued progress in this area. Regarding the various segments, I'd like to make a general observation about all the professional segments. No one wishes for a situation like the current pandemic. However, our commercial contractors, along with all the contractors we serve, have found the market to be challenging. This includes navigating approvals for various jobs and adjusting to last-minute project changes. These challenges also present opportunities for us to provide solutions for our customers, and I'm proud of how effectively our teams have responded across each professional segment. As for the segments, I see promising comparisons as we head into the next year. In residential repaint, we are coming off a quarter with strong double-digit gains, although we're not yet performing at full capacity. The interior segment is improving significantly, presenting a great opportunity for continued market share growth. Our leadership and field teams are actually increasing new accounts year-over-year faster than in previous years, even during this pandemic. In new residential, we similarly expect favorable comparisons next year. We concluded the fourth quarter with mid-single digit growth. Our exclusive partnerships with 18 of the top 20 builders put us in a solid position, especially since custom homebuilders have been less affected during this period. As we enter 2021, we're optimistic considering the persistent shortage of homes in the market, and our new residential customers are pleased with their progress as we move into 2021. In the commercial property management sector, we also see strong comparisons looking ahead. This segment has been affected by turnover rates. However, our customers have started to notice more activity and movement from their tenants, and with our strong partnerships, we expect this area to show progress as we enter 2021. These observations cover the professional segments. You didn’t inquire about the DIY side, but Al, could we discuss DIY from the company perspective?

Thank you, John. This is Allen Mistysyn. DIY demand is a concern for everyone as we look ahead to next year. Let me provide some insights and data on this. When I review the second and third quarters together, our sales this year are just slightly below last year's figures. The combined DIY increase for Consumer Brands and our Americas Group is up 23%, which accounts for about a quarter of our total sales during those quarters. The other 75% of our business segments have decreased by approximately 6%, although they have shown better trends in the third quarter compared to the second. John mentioned TAG and our expectations for strong new residential repaint, new residential sales, growth in the commercial sector, property maintenance, and P&M becoming less of a challenge in 2021 compared to 2020 due to easier comparisons. In our Consumer Brands Group, investments and customer programs aimed at driving volume are projected to contribute to incremental sales growth next year, though they may not fully compensate for a more typical return in DIY demand. Additionally, the Performance Coatings Group is experiencing strong packaging demand, which is expected to persist early next year, alongside improvements in auto refinishing, industrial wood, and coil, with general industrial gradually returning to steady growth in North America. Our ongoing investments in programs, representatives, tools, and services to offer solutions to our customers give us strong confidence in our capacity to grow these other segments and help mitigate the potentially tougher DIY comparisons next year.

Okay. Thank you. And just for the second question, John, you mentioned that you expect demand to be choppy. That seems reasonable, given what we're seeing. You also have higher raw material costs that seem likely higher operating costs with freight, et cetera, and just cost to serve the customer, just given the omnichannel shift across your TAG store network. In that context, how should we think about pricing, as it relates to an early outlook for 2021? Thanks so much.

Thanks, Ghansham. I'd say our response here is going to be pretty consistent with past discussions that we've had, Ghansham. As we look at all costs, the raw material baskets and everything that you laid out there from healthcare to energy, every aspect of the business, we look at that on a 30-day basis, every 30 days with our management team, we evaluate where we are. We make that decision. We immediately then proceed out with any increases that we've decided on, with a goal of talking to our customers first. Once we talk to the customers, then we bring it to the financial community. We've not announced any increases now, or we're not out with any right now. And should we, like I said, we'll be out in front of the customer first and then come to you.

Yeah. And, Ghansham, we're in the middle of our normal next year operating plan reviews with their divisions. And, as you know, we'll push back on our suppliers. We'll try to internalize and offset as much of the raw material and other increases as we can. And then, absent that, we'll have to look at a price increase.

Thanks so much, you guys.

Thank you, Ghansham.

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

Thanks very much.

Good morning, Jeff.

Hi. Good morning. Is DIY growth in the stores business very different than the rate of DIY growth in consumer brands in North America?

No, they're very similar.

But, Jeff, as you know, DIY and our TAG organization is a much smaller percentage overall.

Yeah. And in your Performance Coatings Group, you had very, very good growth in coil, but negative growth in general industrial. What's the difference between those two markets, so that coil is growing and general industrial is down?

So it's the market that we serve, Jeff. If you look at coil, we've had the benefits of appliances, as an example, in coil as the commercial projects have picked up extrusion and some of the applications into the commercial space have been positive. The other thing I'd say about the coil, give this team great credit. They have been winning business across all regions. So we talk a lot about share of wallet in our TAG business. But if I were to use that kind of description for our coil business, I'd say, they've been doing very well in that space as well. General industrial, if you look at those applications for coatings in our GI space, again, choppy is a good description here. We did have growth, as we talked about in a few of the geographies: Asia, Europe, LatAm, I believe, in local – in same currency would have been slightly positive. It's mainly the U.S., and it's a choppy market here in the U.S. for GI.

Okay. Thank you so much.

Thank you, Jeff.

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

Yes. Thank you. How would you characterize this COVID DIYer is being different from your legacy DIYer? Are they more inclined to buy higher quality paint? And are you – there's a couple of comments in your earnings release about product mix. And I was just curious whether you're seeing that in terms of whether it's in consumer or it's in TAG, are they buying higher quality paint?

I'd say that we are seeing a positive mix shift, Steve. I would say that there is a difference between these customers. If you look at the DIY customer in a Sherwin store, they're typically looking for that specialty store experience. Al just mentioned a small percentage of our business, roughly 10%. The expectations there are just that. They're looking for that specialty store service and expectations in areas that might include color, selection and so on. If you look at the overall, though, what I would say is that our experience this go around is that these are people that are, in general, home, as we've described, nesting, and in many cases, finding themselves looking at a wall that may not have been painted in the last decade. And I think I mentioned on one call that in some of our stores, they've kind of jokingly referred to these as what the heck projects, where they're sitting around, kind of bored out of their minds, and they're saying, 'What the heck. I might as well go ahead and paint this room.' The reason I share that with you is that we've often gotten a question about do we have a concern that we might be leveraging or mortgaging residential repaint customer sales to a DIY customer. We've not seen that. In fact, our residential repaint customers' bidding activity is actually increasing not only sequentially but year-over-year. So our customers on the residential repaint side are quoting more now this year than they were last year, and they are telling us that the success rate is actually increasing. So we have a DIY customer, who's home. They want a good experience. They are typically moving up and we have a res repaint customer backlog that's growing.

Steve, the only thing I would add to that is it's really by design in our Consumer Brands segment. The programs that they're putting in place, the training at store level, is really trying to drive to the higher-quality products because that – as we've talked about customer solutions, that helps them drive their top line and bottom line, and it also helps us drive our top line and bottom line.

And overall, the customer ends up with the best experience. So it helps our brand position with our customers as well.

And so you had what was a 3% same-store sales in TAG. Was that all priced, given there might have been a price/mix lift from this DIY initiative?

You could – price would have been a little bit below 2%. The rest is volume. The one thing I would point out, though, Steve, if you look at our North America stores at 3%, as you know, P&M has been a drag. If you backed out P&M, architectural would be up mid-single digits. So I put it in perspective to say if price is a little bit below 2%, volume would be more mid-single digits on architectural.

Okay. Thank you.

Thank you, Steve.

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

Great, thanks. Good morning. Congrats on the great results. I just wanted to ask about your comment on margins and SG&A. Could you elaborate on maybe some of the increases in SG&A you're expecting in Q4? And then maybe even to next year, do you think you've entered a new gross margin level, just given the volume uplift here and some of the cost reductions you guys have undertaken? Maybe you can just elaborate on some of those issues? Thanks.

Yes, Arun, as you know, since we don't go down item by item on the P&L for our guidance, but let me try to give you some color around our fourth quarter in general. First off, we believe we have a pretty strong fourth quarter, with adjusted EPS about 10% increase over – at the midpoint over a really strong fourth quarter last year that was up over 20%, on top of a 12% increase in the fourth quarter of '18. That tells you our flow-through is in the mid-20% range at the midpoint, while investing back in our business. And let me start by saying what we talked about at the second quarter – in the second quarter. What we talked about, at FCP is that, these are the investments in products, services, customer programs that provide solutions to our customers, allow them to grow share and be more successful. These are investments in new store and reps. In our e-commerce platform, North American stores, I talked about the consumer brand, investments and expanded customer programs that will allow our customers to sell more of the right gallons through the department, which helps drive their profitability. And then also performance coatings investments in reps, services and programs that add value to our customers, allow them to be more productive. And you talk about what that means going forward. And we believe this cycle is very, very similar to 2008. We continue to invest and lean forward into our customer success and these are the right investments. And the 3, 5, and 10-year compounded average growth rate of our North America architectural sales was high single digits coming out of that period, and we believe that was a multiple of our market demand over the same period. So we believe this similar environment. We expect these current investments across all our segments allow us to grow multiple of end market demand over the mid and long term. The only other comment I would make on gross margin, Arun, is that, in the fourth quarter, we do expect to see a typical seasonal architectural slowdown in demand, which does impact our gross margin. Historically, our third quarter is a stronger gross margin performance than the fourth quarter. Part of why we had such a strong performance last year here was we did see a sequential improvement in our gross margin last year from third quarter to fourth quarter. As you know, we get to year end, it's a small quarter, we get into inventories, LIFO, a number of adjustments that kind of drove that improved margin in last year.

Thanks for that detail. And then also just wanted to ask about your capital allocation. You spent over $400 million on buybacks in the quarter. So nice to see that. Is that generally how you're going to be running the balance sheet now that, obviously, not building cash? Maybe you could just also discuss the M&A market, if there's any opportunities that you can take advantage of in the near future? Thanks.

We ended the quarter with a higher amount of cash on our balance sheet than usual, but I wouldn’t read too much into it. Our capital allocation policy hasn’t changed, and we won’t be holding onto cash; we’ll be putting it to use. This situation is mainly a timing matter. We had stronger revenue in the latter part of September, and our teams are generating higher operating margins and cash flow from outside the U.S., which we plan to bring back and invest in the U.S. Again, it's mainly a timing issue. You're right to notice our solid cash generation of $2.6 billion in the first nine months. We returned over $1.6 billion to our shareholders through dividends and buybacks, which is an increase of 86% from last year, and invested $190 million in capital expenditures. We also reduced our debt by nearly $400 million, bringing our debt to EBITDA ratio back to 2.5. Looking ahead to next year, you can expect a similar approach from us, and I’ll let John discuss M&A opportunities.

Yeah. I'd say, first, Arun. I think it's important to acknowledge that in challenging times, I think you get a sense for how much discipline and conviction you have in your strategy. Things get tough, you can find your way to want to buy a book of business, or let's just buy sales. That's not who we are. I'm really proud of our teams on an organic basis as well as in the M&A space. We've got a very defined strategy that we're working here. And we're very much determined to stay on that, and that great pride in the fact that our teams are doing just that. Now that said, I'm also very pleased with the progress that we're making in this area. We've got some very good discussions going on and feel good about the targets that we're pursuing. As a reminder, the targets that we pursue largely will be in the industrial space, targets that fill either a technology gap or strength in a region that would help us in accelerating our existing businesses and their goals or in establishing a position in a geography where we're underrepresented. Now that said, our goal is not to be everything to everyone, everywhere. So we talk a lot internally about our rights to win, and how we'll go about this and bring into the market a unique and differentiated value that would help us to create shareholder value. So I'm pleased with the progress, and I think the discussions have gone pretty well here.

Thanks.

Thank you, Arun.

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

Thank you. John, just curious, to that end, in terms of – it sounds like mainly you're interested in bolt-ons. In the past, you've talked about maybe optimizing the portfolio. Are there also some assets you might look to invest? Are you pretty comfortable with the portfolio you have at today?

Well, comfort is not a good word here at Sherwin-Williams. We don't like comfort, nor do we like complacency, Bob. I think you know that. So we're constantly reviewing programs, SKUs, brands, businesses. I think we owe that to our shareholders. So I think there's a very disciplined approach that we take. We're very blessed to have four terrific group Presidents that understand that, and lead that. It is not something that Al and I and David are pulling on. I think these are terrific leaders that understand how to make money, how to create shareholder value. So there's a constant review on all levels, from businesses, all the way down to the SKU, including programs. And those programs are sometimes difficult. If you're launching a program, it's your baby, you want to stay close to that. But I think these terrific leaders are demonstrating a willingness to look at every decision and ensure that it's creating value.

And most of your markets, we sort of come to expect the performance that you delivered. It's been very strong. I'd say, a wide outlier was how well you did in refinish. So can you contextualize this for that? Of a $5 billion sales quarter, how much is auto refinish, and what markets you're in? And how did you capture that market share, that dramatic market share, relative to what the industry was doing? Thanks.

Thank you for the question, Bob. It's a great opportunity to highlight the dedicated team that has been working diligently, although the challenges posed by COVID have made it difficult for their achievements to be fully recognized. While we don't specify the exact size of the business, I can say that it has been showing positive trends. In response to your question, we believe we are successfully increasing our market share. This success is due in part to the technology we offer. There has been interest in the synergies between Valspar and Sherwin, and this represents a strong example of how we are integrating both legacy technologies to create a well-received system. I recently spoke with several large customers who have switched many of their operations to Sherwin, highlighting that our technological advancements, as well as our channel model, are effective. Our strategy in our automotive stores mirrors that of our architectural stores, and the results have been impressive. We intend to continue fueling this growth.

And Bob, this is Jim. What I'd add to that is auto, we saw growth in every region. So it wasn't just one niche there, it was every region that we operate.

I like the gas on the tank.

All right. Thanks, Bob.

The next question comes from the line of P.J. Juvekar with Citi. Please proceed with your question.

Yes, good morning.

Hi, P.J.

Your margins were up almost 600 basis points. Can you roughly break that down between what benefit you got from higher volumes versus lower input costs? And earlier, I think you mentioned the mix effect. Even if it's a rough breakdown, can you just give us an idea how that breaks down?

Yeah. P.J., I know you've heard me say this a bunch of times, but it always starts with volume. And I talked about the mid-single-digit volume growth in architectural and TAG, or North America paint stores, where they talk about the high 20%-plus growth in our Consumer Brands Group. And we started seeing a return to sales growth with our Performance Coatings Group. So that's always the biggest driver. We did talk about the favorable product mix, and it was a little bit less than what we saw in the second quarter. As you know, raw materials moderated some. And again, we talked about our third quarter being less of an impact than the second quarter. And then we also had pricing that we had put in earlier this year. So, if you wanted to force rank them, I'd start with volume being over well over half of the increase, and then the other three kind of bucket rest of it in fairly similar order or size.

Okay. John, I have a question for you. Your performance during the pandemic has been excellent so far. However, considering the possibility of another wave of COVID, which seems to be starting, how are you thinking about the different business segments? Do you believe the DIY consumer market will remain strong, while the contractor recovery might lag a bit? I assume you are conducting internal planning regarding this, so could you share your thoughts on your decision-making process?

We do a lot of scenario planning, and I want to emphasize the experience of our leadership teams. While we can't predict exactly how things will unfold, we have a wealth of experience across all levels of our organization, which helps us navigate challenges. I have strong confidence in our ability to respond effectively. We routinely consider various scenarios, but ultimately, execution is key, and it relies on the exceptional people we have in the field. Our MTP program has been in place for 40 years, focusing on recruiting, training, and retaining talent. We bring in 1,500 college graduates each year, resulting in about 10,000 graduates currently employed across the company. These individuals, who often start in our stores, are well-versed in our culture, strategy, and expectations, which greatly benefits our operations. Notably, 80% of our TAG representatives began their careers in a store, allowing them to gain a comprehensive understanding of our products, logistics, and customer service. This background enables us to promote talent from within. In fact, 70% of our TAG leadership team has gone through our MTP programs, giving them the experience to understand what we need from our workforce. As I mentioned before, this talent pipeline continuously advances, with several of our Division Presidents and Vice Presidents being MTP graduates as well. This creates a clear career path for our employees, enhancing retention. Our commitment to retaining talented individuals who possess the necessary skills and drive is critical to our strategy, and we have a long history of low turnover. Currently, our voluntary turnover is around 7% to 8% across nearly 5,000 stores, which is a statistic not many companies can boast. Additionally, 7,000 employees have more than 20 years of service, representing about 15% of our full-time workforce. The result is a dedicated and talented team that thrives in a supportive culture. When our leadership team guides our employees, they tend to follow and execute exceptionally well. I'm proud to be a part of this effort, as we continue to succeed in the market through the hard work of our teams.

Great, fantastic. Thank you.

Thank you, PJ.

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

Thank you, good morning. John, just going back to the SG&A investments in Q4, is there any way to quantify what the increase is either versus the prior year or versus Q3 in terms of this increase or this added investment?

Yes, David, we haven't put a number on them because we're focused on discussing what we've accomplished rather than what we plan to do. To frame it, in the fourth quarter, there is a seasonal decrease in sales related to architectural. Typically, we see our SG&A spending remain relatively constant from the third quarter to the fourth quarter if you analyze it over time. This means there's a slight sequential deleveraging. I mentioned we could see a little year-over-year deleveraging as well and not experience the same benefits in SG&A as we did in the third quarter. This is really contingent on the wide sales range I provided, given the uncertainties in various segments like general and industrial that we discussed. As we maintain sales momentum into November and December, that will guide our investment decisions. We aim to balance our approach, as one of our group presidents describes it. We don't want to get too ahead of ourselves, but we're also considering the long-term outlook, which will influence where SG&A percentage falls.

Very helpful. And now just going back to what you said earlier, are DIY sales up 23% combined in Q2 and Q3 year-over-year?

That would be pretty close. Yes.

Thank you very much.

Thanks, David.

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

Yes. Good morning. A couple of questions on the subject of inventory. If I look at your own balance sheet, inventories declined about 8% year-over-year in the third quarter, despite sales growth. And I suspect that many of your customers have been trying to manage for cash and liberate working capital as well. And so in that context, I'm wondering, do you expect to run assets harder than normal over the winter? And would you expect your customers to do the same, such that we might see a slightly different seasonal pattern through the first quarter of 2020, 2021 relative to normal?

Yes, Kevin, you're correct about your first point. Given the strong demand from DIY projects, we have been focused more on maintaining our inventory rather than significantly increasing it. We plan to push our supply chain harder in the fourth quarter and into the first quarter to build up our inventory ahead of the spring selling season. Regarding our collaboration with customers, we aim to ensure that we are producing the right products and delivering them promptly. It's not just a matter of simply increasing inventory at the store level, whether for our own stores or for our architectural and consumer customers; we're actively engaging with them. The dynamics will also depend on the DIY demand trends we observe this winter in November and December, moving into early next year and then gearing up for spring. This will be an ongoing process. I want to emphasize that we are in regular contact with our customers on a daily, weekly, and monthly basis to ensure they receive the products they require.

Yes, Kevin, I'd echo the point, and I'd like to just emphasize as we look, particularly on the consumer side. Heidi Petz and her team are working closely with each of those customers. We're going to drive inventory to support those customers. And if it means putting a little more in working capital, we'll do that, but we're going to serve those customers.

Yes, Kevin, I guess I'd be remiss if I didn't say on the other side, where we've been under a little bit of pressure on the Performance Coatings side. I think that team has done a really, really nice job controlling inventory, so we didn't build the wrong inventory. And they've got a lot of different programs in place to try to drive complexity out of that supply chain, whether it's SKU rationalizations, platform consolidations. And I give that team a lot of credit for maintaining a disciplined approach to inventory, whereas on the DIY side, we're just full out. We're making as much as we can possibly make.

That's really helpful. And then, as a second question for Jim, perhaps. I was curious about raw materials. You referenced some recent cost inflation probably since June, is my guess. But just curious, if we flatline raw materials from October, what do you think that would say for the basket in 2021 versus 2020?

Yes, Kevin, based on our prepared remarks, the third quarter experienced a decline in the mid-single-digit range, primarily due to lower costs for resins, monomer, and solvents. As we approach the fourth quarter, we expect a year-over-year benefit, although it may be less significant. We've observed a slight increase in some feedstocks, with propylene and ethylene rising, as well as HDPE in the packaging sector. Looking ahead to 2021, it may be premature for a comprehensive outlook, which we will provide in January as usual. However, from a directional standpoint, we've noticed sequential increases. Oil prices have climbed, putting pressure on some feedstocks, although the connection is not always direct. Additionally, upstream capacity from refineries and other facilities is being managed more tightly during the pandemic, leading to a tighter supply-demand scenario. Demand is also picking up. On the TiO2 front, we are closely monitoring conditions as we enter next year. It's largely about anticipating demand. So far, North America and chloride have remained relatively stable, while some Chinese TiO2 producers have announced recent price increases. There are many factors at play, but we still expect benefits in the fourth quarter. However, we lack clarity regarding 2021 at this time.

Okay. Thank you very much.

You bet.

Your next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed with your question.

Thanks very much. A quick one on interior paint, are you noticing any regional trends, whether it's a state level or just a section of the country level as it relates to interior, just thinking in terms of COVID virus trends, or is there any sort of differences between how fast interior is coming back to which part of the country you look at?

Not really, Vincent. I'd say it was a bit slower in some of the more urban areas, but we are starting to see some pickup in those areas as well. So I can't just – I can't explain it. If people are just getting tired enough to the point where they're saying just come on in, or they're leaving, or what's happening, but we are – it's pretty well even across the country.

Okay. And then just one last question on your cost side of the equation. In the stores, now that we're a few quarters into this, has it become apparent that you have higher costs associated with servicing customers because of COVID that you might need to recover next year, or is that not the case?

Not the case.

Thank you very much.

Thanks, Vincent.

Thank you, everyone. This will conclude today's conference. You may now disconnect your lines at this time. Thank you for your participation.