Lori Walker - SVP and CFO Gary Hendrickson - President and CEO

Silke Kueck - JPMorgan Nils Wallin - CLSA Abhi Rajendran - Credit Suisse Don Carson - Susquehanna Financial Rosemarie Morbelli - Gabelli & Company Chris Nocella - Barclays Capital Saul Ludwig - Northcoast Research James Sheehan - Deutsche Bank Bob Koort - Goldman Sachs P. J.

Juvekar - Citi Steve Schwartz - First Analysis Dmitry Silversteyn - Longbow Research Andrew Don - KeyBanc Capital Markets Mike Hamilton - RBC

Good morning and welcome to our earnings conference call. Today we'll be covering results for the first quarter.

Gary Hendrickson, our President and Chief Executive Officer, is with me on our call this morning. Before we begin, I'll direct your attention to the press release we issued this morning, which contains much of the information that we'll be covering in the call.

This call is subject to the forward-looking statements language contained in our press release and our comments may include forward-looking statements as that term is defined by Securities law. This morning I'll cover our results for the quarter.

Gary will make a few comments. And then we'll respond to your questions.

First quarter sales totaled $885.6 million, a 5.1% increase from the first quarter of 2011. Adjusted for currency and acquisitions, sales were up 3.6%.

Adjusted net income per share for the quarter increased to $0.62 in 2012, a 59% increase from $0.39 in 2011. Our press release includes details showing the reconciliation of our reported to our adjusted results.

My next comments regarding gross margin and operating expense performance exclude restructuring and acquisition-related charges. For the first quarter, our gross margin was 33.5%, up from 31.7% in 2011.

Our margins benefited from our carryover pricing actions, moderating raw material costs, previously completed restructuring actions and improved productivity. As a rate to revenue, operating expenses were 22.6%, down 60 basis points from 23.2% in the first quarter of 2011 primarily due to leverage on higher sales.

Quarter-over-quarter operating expense dollars increased $4.9 million or 2.5%. The reported tax rate for the first quarter was 26.4%, down from a rate of 29.3% in the first quarter of last year.

The lower rate was due to the geographical mix of earnings and a one-time favorable tax benefit for a foreign subsidiary. This one-time benefit was already anticipated in our full year tax rate guidance, which remains at 30% to 31%.

Average diluted shares outstanding were 95.5 million, down 4.1 million from last year due to repurchases which were partially offset by options. In the quarter, we repurchased 1.25 million shares for approximately $49 million and have 7 million shares remaining under our current authorization.

We estimate average shares outstanding for the second quarter to be approximately 95 million. Recapping our sales performance for the quarter, adjusted for currency and acquisitions, our overall core growth was 3.6%, primarily driven by high single-digit price increases which offset a mid single-digit decline in volume.

Currency was positive 0.2% and acquisitions added another 1.3% for a total growth of 5.1% in the quarter. Looking at our segment results for the quarter, and this is adjusted for currency and acquisitions, our Coatings segment sales increased 6.6%.

Sales in this segment benefited from pricing and new business which offset core volume declines. Paints segment sales were flat, reflecting continued weak market conditions in the U.S.

and Australia and slowing growth in China, which was offset by the impact of our pricing. Sales in Other increased 2.8%.

I'm now going to move into a discussion of our EBIT margins for the quarter. All the numbers that I'll be discussing exclude restructuring charges and Wattyl acquisition-related charges in the 2011 period.

Our Coatings segment EBIT margin was 15%, up 360 basis points from 11.4% in the first quarter of 2011. The segment benefited from our pricing initiatives, productivity improvements and the impact of previously completed restructuring actions.

Our Paints segment EBIT margin was 8.1%, up from 7.9% in 2011. The EBIT margin for our Other category was negative-0.3% compared with negative-15% in the first quarter last year.

As a reminder, Other includes our corporate expenses. The total company EBIT margin for the quarter was 10.9% compared with 8.4% in the first quarter of 2011.

Moving to the balance sheet, our net debt at the end of the first quarter was $950 million, an increase of $91 million from the end of last fiscal year. The increase was driven by share repurchases and the normal seasonality of operating cash flows.

During the first quarter, our operating cash flow was a use of $25 million compared with a use of $40 million through the first quarter of last year. We estimate free cash flow, which we define as operating cash flow less CapEx and dividends, to be $160 million to $190 million in fiscal year 2012.

In January, we strengthened our balance sheet by issuing a $400 million 10-year bond with a coupon of 4.2%. We used the proceeds to pay down commercial paper and the remaining funds will be used to pay off the $200 million bond that matures on May 1, 2012.

Interest expense will peak in the second quarter at approximately $19.5 million due to the timing of the bond payment. Our interest expense for the full year is estimated to be between $68 million and $70 million, up from $62 million last year.

Our net debt to capital was 43.9%. We ended our quarter with $694 million of reserve liquidity, but included $588 million of available committed credit facilities and $306 million of cash, of which $200 million of the cash will be used to pay for the bond maturing in May.

Capital spending in the first quarter was $14.5 million, up from $12.1 million in the first quarter of 2011. Our capital spending forecast for the full year is $90 million.

Depreciation and amortization for the quarter totaled $22.7 million, up slightly from $22 million in the first quarter of 2011. Our full year forecast for depreciation and amortization is approximately $90 million.

As mentioned in our release, we are raising our fiscal year 2012 guidance of adjusted net income per share in the range of $2.92 million to $3.12, which excludes restructuring related charges. And with that, I'll turn the call over to Gary for his comments.

Thanks, Lori, and good morning everyone. We're off to a good start for the year.

Against the backdrop of uneven global demand which impacted volumes in a few of our larger businesses, our execution was excellent. We were able to improve our operating margins both sequentially and year-over-year through a combination of pricing, productivity and the benefits of previous restructuring actions.

Our new business initiatives also contributed positively to our results in the quarter and helped to offset market weakness in the global consumer and packaging product lines. A new business in our coil and general industrial product lines were particularly strong.

We also continued to do a good job of managing costs. Expenses as a percentage of sales were down were down 60 basis points and up only $5 million year-over-year.

Before we talk about our outlook for the rest of 2012, let me just provide a little context about this quarter versus Q1 last year. In the first quarter of last year, we were experiencing significant raw material inflation that had not yet been recovered with pricing and our margins were depressed.

This year, cost price is better balanced in many of our product lines and we are also seeing the benefits of restructuring and productivity initiatives. For the remainder of our fiscal year, we're planning for a challenging macro environment.

We anticipate potential demand challenges across several of our businesses in regions. And while we remain guardedly optimistic about the U.S.

and Latin America markets, we're cautious about Europe and to a lesser extent China. We also expect this year to be challenged with rising raw material cost.

We believe that Q1 was a low point for 2012 and our cost will be up sequentially in Q2. And we expect raw materials inflation for the year of mid-to-high single digits.

As Lori mentioned, we raised our guidance to $2.92 to $3.12. The assumptions behind this guidance were as just stated, rising raw material cost and demand dynamics that are difficult to predict at this early point in the year but we expect to offset these challenges with new business, pricing when needed, substantial productivity and good management of expenses.

And with those comments, I'm happy to take your questions.

This is Silke Kueck for Jeff. Two questions, in coatings, sales year-over-year were up, I don't know, $38 million.

Your profits were up $22.5 million. So the incremental margin was close to 60%.

And I was wondering whether you can just discuss really what the incremental benefits, when you look at cost savings versus price from material benefit. And in the middle can you talk about whether you exhibit any no-margin business.

We've got the benefits, Silke, year-over-year from a number of different things. One as I mentioned, cost price was a little bit better in this quarter then it was last year.

That was true across most product lines in coatings. Your recall at the coatings segment is where we did most of our restructuring last year.

So we're seeing those benefits flow through the P&L. Here we have a number of productivity initiatives in most of those businesses that are also benefiting us.

And then the last thing, our new business efforts in our coating segment will particularly have been and were in this quarter particularly strong. And because of all the restructuring that we've done in the lower cost structure that we have, that new business is coming in at very healthy incremental margins.

So those are the main drivers of the improvement that you saw. And then your last question about exiting unprofitable our business not, if we did it wouldn't be material.

Just on coatings again, have you seen any strength so far in any particular end market that had helped the profitability? Is it anything in agro equipment, appliances, construction that drove the solid results?

The agro equipment market has been strong for a number of quarters. But you really know the growth was mostly about our new business initiatives, particularly in our general industrial segments and our coil segment.

I wouldn't say that the market per se was particularly strong but our new business efforts were.

And then just sort of as a follow-up I think there is perhaps something like 5% to 10% unit growth for agro equipment expected for North America this year and maybe 5% to 8% globally. Do you believe that you will be in lined with the market better than, worse than in terms of your own volume growth in that business?

That's one of the segments that we're taking share in and growing and so if it's 5% that to use your number than I would expect to grow faster than 5%.

This is Abhi Rajendran calling in for John. First quick question on the raw materials, you talked about raw is being up mid-to-high single-digits.

Could you break out your expectations on TiO2 versus the acrylics chain, especially given some of the recent moves we've seen in propelling?

We tend to think about our entire basket when we give those numbers but it's probably acknowledged that TiO2 suppliers are out with the couple of nominated price increases and we expect to at least part of that will stick. And then the rest of it, is as we look forward if the economy starts to recover and we get supply and demand issues then we'll start to see some of that.

And then the price accrued is persistently stuck at around $100 of barrel and that's driving some incremental inflation as well. So that's about as granular as I incur to get.

And then the just quick question on China, you mentioned that you are expecting a little bit of weakness there for the coming year. Would you expect that weakness to kind of persist throughout the course of the year or are you seeing current weakness with perhaps the gradual pickup through the rest of the year?

I think it's the latter. We're planning for that.

Our first quarter was relatively weak. The growth rate in our consumer business slowed in the quarter.

But we had, as I've said several times on these calls that our main barometer were how we think the Chinese market will do over the relatively near term are the feelings of our distributors at Huarun. We had a meeting with our Huarun distributors last week and they feel confident.

They remain committed to their budget numbers for the year.

And then one last quick one, if I may, your other expense line came in a little bit lower than you had. Are there any particular drivers behind this?

And can with expect this to be more sustainable lower level going forward?

The main driver there is favorable FX and that's just from transaction. And I would imagine it would be roughly equal to last year slightly less.

It's not a big number for us.

Question on packaging, that sub-segments have been weak for I guess, three quarters, yet your overall coatings margin is still doing quite well. So can you describe what exactly the issues are with packaging volumes and what margin impact that's having?

And then just quickly on raws I just want to know are you having any success in reformulation specific on TiO2. Have you made attempts to either use lower quality Chinese TiO2 or use acrylic based standards to try and manage your TiO2 cost.

Yes, we are doing both of those of things and we're using Chinese TiO2 in a number of our businesses not all of them but a number. I'm satisfied that we're doing at least as well as the industry is in terms of substituting other materials for chloride TiO2 and sulfate grade Tio2 from China or Chloride grade.

So we're pretty satisfied with our efforts there. Packaging volumes, the issue is North America and Europe.

Our business in China was great. Our business in Latin America was very good.

But the beverage volumes in Europe and North America are weak, weaker than we would expect them to be. And I think that that is a reflection of consumers who are a little bit tighter with their first rings at this point in the economy cycle and they typically are.

I don't believe that it's structural. You're right.

It's been about three quarters. But this has been a very steady business for us for a very long time.

And the sly of weakness that we're seeing is a bit unusual. And I believe that it's tied to the recession.

And finally, you beat consensus considerably by almost $0.14. You're only taking up your guidance range by $0.05 is that just due to a higher tax rate in the back half of the year or is it just more your macro-caution on the business?

Don, it's pretty early in the year. And we don't know how it will play out for the rest of the year.

And as I said, we've got some challenges we think in some of our end markets. Raw material inflation is still uncertain.

So the balance of all those things together will lead us to be maybe a little bit more cautious than you would have expected. There is one other factor which is the bond and the incremental interest expense that will be incurring for the remainder of the year which is in fact are going to do some of the models that are out there.

Gary, could you us bring up to date on the progress you are making with Wattyl in Australia, talk a little bit about the housing market in Australia as well as the progress of Lowe's and Woolworths adding stores?

Sure. We're pleased with the progress that we've made against our plan in Wattyl, where if not ahead of plan we're certainly on our plan for where we expect it to be at this point in time.

We didn't expect the housing market to be as weak as it is and so the volumes in the market are significantly weaker than we would have expected. But we're working our way through that.

And we are sort of controlling the things that we can control in that respect. The joint venture Masters is the name of Lowe's joint venture.

It appears to be doing extremely well. I think they have eight stores open.

We want most of the shelf space in those stores with our Lowe brands and most stores are doing very well. So we wish the housing market were stronger but we're pleased with the progress that we've made and our restructuring at Wattyl and some of the new business initiatives that we have at Wattyl and we're very pleased with the success that we're having with Masters.

And then in the coating side, was some of the margin improvement is the direct result of the impairments that you took on the wood coating side. How much did that help?

That had no effect, Rosemarie.

Why is Warren comfortable with what is happening in China for the balance of the year? Is it that they see the construction market improving or are there other reasons?

I think, we're in the right place. I mean our water headline is about China is about what's happening in Tier 1 cities where our end distributors were not distributing Tier 1 cities.

We are in Tier 2 and Tier 3 cities. And the situation there is different than Tier 1.

There is Tier 2 and 3 cities are still growing. So that's one factor.

And there is a new Chinese initiative to stimulate first time home buyers and the lower end of the market. And that also is Tier 1 and Tier 2 cities.

And we're participating in that as well. So not that I think that, I think they feel that the Chinese government will manage through in a positive way.

Inflation and growth and that we're placed in the right places in the country geographically.

Just in your paint segment, your volume growth was impacted by inventories down in the U.S. in Q4.

Did you have the same issues in Q1 and what you're expectation for volume growth in this business for the rest of the year?

We did not have the same effect in Q1, Chris, you're right we did in Q4. Volume growth and that was a North America phenomenon, last year.

And our volume growth sequentially and North America was good. And what we expect for the remainder of the year in North America is that we're hopeful that we'll see growth.

And we're planning for flat-to-low single-digit growth in North America. As I mentioned, our volumes in Australia were weak because of our housing market.

And our volumes in China were weaker than we would have liked because of the slowing market there.

And just on raw materials. Last quarter you mentioned that you're about 10% to 15% of raw material inflation to recover.

Are we still going to have that similar level and when do you expect it for a recover cost based on your current expectation for inflation?

We may progress in Q1 in our coating segment. We did not make the progress that we had hoped in our paint segment and several of the significant channels in our paint segment we are still on active discussion with our customers about the need for more pricing.

In coatings, in some of our product lines were substantially recovered and some of the smaller ones we still need some work.

And in paint, were you able to get price increases throughout this year or are you still under discussion with those?

I'm not sure I understand your question about timing?

Were you able to get price increases through on paint segment this year yet or are you still under negotiation with those?

In some channels we have gotten price and couple of the channels we're still negotiating.

Gary, could you quantify amount of the dollars of new business that you had in the first quarter of this net new business that you had this year that you didn't have last year?

Lori, may be able to get you the dollars, Saul. I know the percentage.

The percentage in coatings was mid-single digits.

And overall from a company, Saul, it was in the 2% range.

In China, was your volume actually down there? I remember you ended the year with, I don't know, was it 2,500 distributors versus 2,000 a year earlier.

So with 20% more distribution points, even with that was your volume down?

Yes, it was pretty much flat. You're talking about the number of stores that we had at the end of the year, Saul, most of those stores were loaded last year.

And the sell through on those is what should drive our growth as we go through this year.

On the issue of additional price increases I know as Sherwin announced on their call that they had an 8% price increase announced at February 1. We understand that Glidden did similar increase.

So did you have any such price increase February 1 to commensurate with what we heard from those guys?

We've put price into it recently in our U.S. paint market.

And will that be broad based?

Not through every channel. We're still negotiating in one of the channels in the U.S.

market.

Are you still putting an additional price increases in coatings or you think you've got price rose pretty much where they need to be?

In some of our product lines, Saul, we still had some recovery to make. And as I mentioned in my opening remarks we think Q1 was the low point.

We're starting to see raw material inflation hit again. And as that occurs we'll be having those conversations with our customers about passing that through the consumers or end users.

And Lori, what was that sequential fourth quarter to first quarter change in raw material cost on the unit basis. It looked like they might have actually been down somewhat?

Yes, they were flat, Saul.

And what were they year-over-year?

Up, high single-digit.

And so the real driver of the improved gross margins was that the price rose in coatings or was it the operating cost. I mean at the cost of goods sold level if you stripped out raw materials, what was the change in that's called the bucket of all other cost that weren't raw materials on the year-over-year basis.

No it was three things, Saul, in terms of operating profit which is what we talked about on this call rather than gross margin. It was price cost.

It was productivity. It was some new business.

It was restructuring. And it was leverage on the expense line.

Just on your comment before on TiO2, you mentioned that you thought some of the price increases may stick. It seem like some of that pricing momentum in TiO2 has slowed down about three months ago, and now it looks like it's picking up again a little bit.

Do you think that pricing in TiO2 is going to remain strong through the year or do you see that changing as the season's progress?

There is a difference between pricing momentum and price announcements. And I wouldn't say that there is momentum necessarily because the supply of TiO2 is long, a very long.

The world is a washing TiO2. And so how these negotiations play out over the next several months is a still up in the air.

And I'm not going to predict on this call.

Gary, I was hoping you can help me out a little bit. You embarrassed me with your coating margins.

I wasn't even close. But if I look back at history and typically those margins climb as you go through the year.

And I think that somebody earlier ask that it sound like you maybe being a little bit conservative with your outlook. So can you taught me into thinking that coatings margins can actually erode through the year or are we going to be able to see you generate these mid-teens levels for the balance of the year?

I think we're about where we should be, roughly speaking, Bob, as we go into our second quarter and third quarter which are our highest volume quarters, we're going to get more operating leverage out of these businesses and they might expand somewhat. That's what they normally do.

But I think, where we are right now is a reasonable place for us to be.

And you're going to have plenty of cash flow, you mentioned the bond offering. If you look at your coatings portfolio, there is only a couple of spots where you are not active.

Is there any desire to round out the portfolio with the marine or auto businesses, OEM businesses?

Not at this stage.

And then you mentioned, new product initiatives generate some pretty meaningful volume increases. Maybe this is a too big of a softball for a CEO, but can you tell me what some of those are explicitly or where the bigger ones might be?

The ones that we've been talking about for a number of quarters now, Bob, the coil business is doing really well, particularly in Latin America. North America was good and Eastern Europe were growing in our coil business.

At general industrial business I talked about the segments that were doing reasonably well earlier relative to the off road segments but we're doing well there. We're doing well in pipe coatings and we're doing we're doing well in container coatings and our powder coatings business was good.

So a pretty broad spectrum of new business initiatives for us that are paying nice dividends for us.

And one last, if I may, I recognize your reluctance to be too specific on pricing through the retail channels on your paint business. There is multiple vendors at the various channels you sell so is it typical to see those vendors all increase prices at a similar time or is it possible that you get some to-and-fro in the supplier based to some of your bigger customers?

It's a hard question to ask. I mean, normally you try to get the pricing in the off season for paints.

That's the one your sort of generic comment that I'd make about it but with inflation as volatile as it's been over the last few years. I think some of the normal pricing dynamics have changed a bit, just in terms of timing and retail leadership et cetera.

You had gained market share at lows over the last couple of years. Are you continuing to gain share there or do you think trends have sort of plateaud out now that everyone has a paint plus primer in one product?

I think we're holding our own. If you're talking about gaining share within the paint department there I'd just say that we're holding our own.

So in last couple of years, as you gain share, but do you think this year you can hold your share?

You're making assumption. I don't recall that we're saying that we were gaining share at Lowe's on one of these calls.

So what we have been doing is changing our mix pretty substantially at Lowe's and selling our higher price point products. We drove consumers up to our high def paint and signatures is continues to do well.

So we shifted our mix in that channel, but I think we've held our own in terms of market share over the last couple of years.

So you had a better mix. And then secondly on coatings, when you answered all several previous questions, I think you mentioned your core volumes declined in coatings.

But then ag-equipment was strong, coil and industrial growth was strong, pipe coating was strong. So was it all packaging, coating that sort of led to the declines?

Packaging was a bit weak and our wood coatings were bit weak in the quarter, P. J.

And so those two basically were more than offset the growth in other areas, is that how would you put it?

Yes.

Just one question left, inventory in the retail channel. I think you commented on the last call, that things were a bit light.

I'm just wondering where you think they might stand at this point?

I think they are okay. I think they are in good shape as we go into the painting season.

The industry will start to build inventory as we get closer to spring. Right now I would say they are in pretty good shape.

Okay. So not heavy, not light?

Correct.

A lot of my questions have been already answered. But I just wanted to dig in a little bit into the cautious outlook you have in China.

I mean it sounded like the first quarter you were kind of flattish there in the Huarun business. I'm assuming you're expecting some growth in the region for 2012 given that your distributors have reaffirmed the outlook and I am assuming the outlook originally was for growth.

Second question would be on the Valspar brand that you have introduced or are introducing into the Chinese market. How is that doing and where do you see that business going in 2012, given maybe a little bit lower outlook for the Tier 1 cities?

I tell you that our distributors are very excited about it. And they see it as a great complement to Huarun.

So they have got the opportunity to sell to the Chinese consumer and wants a foreign brand at a high price point as well as the Chinese who are in. So we've got a number of retail stores opened in China now.

They're doing particularly well. We have retail showroom in Shanghai.

But as I said, Dmitry, this initiative we don't plan for this to move the dial for this year or probably for next year. It will be something that we roll out gradually over time.

We're not investing a lot of Valspar money and our distributors are making the investments. But as I said, they're behind it and relative to the total company, it's not going to move the dial, but it's an exciting initiative for our distributors in China.

Second question on the Wattyl and the Australian business, you mentioned that Masters joint venture has now opened up eight stores. Do you know what the roadmap of store openings for them is for the next couple of years?

And secondly, 2012 I'm still thinking of as a margin improvement year for Wattyl. Can we start thinking about 2013 as kind of the growth year for that business?

Well, we're growing with Masters. We have a number of other growth initiatives occurring in Wattyl.

Dmitry, you might remember that we lost the budding business. So that set us back a little bit.

That was about $30 million in business. And we tend to think of the business that we're winning at Masters as the offset to that.

And a breakeven for that is probably the number of stores that might be opened by the end of this year for Masters. So that's how we're thinking about growth in that particular channel, the retail channel.

But we sell through other channels and to drive market we sell through independent paint stores and we sell through our own stores. And we've got growth initiatives in place in both our stores business and our independent business.

If we're successful in those, we're going to start to see growth even this year.

And as far as margin improvement in the operations, from what I remember, it was in the 3% to 4% operating margin business when you bought it. A year into ownership, have you moved the needle there significantly?

No, not significantly, but there was no plan to move it significantly in this year. We think about it in terms of a three-to-five year timeframe, Dmitry.

And built into our guidance and our plans for the year, there wasn't a significant amount of improvement in the Wattyl business. If you do the math, it was 4% times $400 million was $16 million.

So even if we improved it 4%, it's only $16 million in a $4 billion company. So we're not pushing those guys to do anything for the short term that would hurt us in the long term.

So we're taking our time and we're making sure that we do things correctly.

But over the three-to-five year period, do you think that that business can get to kind of your average paints margin of about 8% to 9%?

I think you can do better than that.

Just a couple of quick questions here looking at your packaging, coatings again. I think last quarter, you were telling about a particularly weak pack season that was affecting volumes.

I'm wondering if you guys have any further visibility from your clients into what the spring season might look like.

We really won't know until the crops are in and harvested. We really don't get a point of view on this, Andrew, until late spring.

And then shifting to China also, you mentioned that kind of 30-plus figure as the number of additional lines you're looking incoming in Southeast Asia. I was wondering if you might be able to provide us any further granularity on the timing of those expansions.

And then just kind of assuming that you maintain your current share to handle the volume, is that kind of baked into these capacity expansions that you're going to go through at your South China facilities or would that require additional expansion as you think about that going forward?

We think we'll get our fair share of that growth. We'll have to get back to you on what that number is and our plan for the next couple of years.

But we will have to expand one of our plants in China to accommodate the growth that is occurring in China, and that is in our capital plan for the year. Lori talked about the $90 million plan.

It's in that plan.

Wondering if the timing of Chinese New Year has any impact?

No. That's a Q2 event for us, Mike, and it was a Q2 event last year.

Could you give some comments on your strategic initiatives in Asia? Is there anything worth noting on the efforts and giving us an update?

I'll only say that we're pleased with where we are particularly with the container business. At all of our businesses in Asia, this quarter performed reasonably well.

Some performed very well. And we're expecting that we're going to have a good year, particularly in our industrial businesses.

That could be a long conversation.

Finally, you've done such a nice job in new customer penetration. Is there anything in terms of new product where you're making inroads, where you weren't a quarter or two ago?

No, none that comes to mind, Mike. I think this quarter was a continuation of what we've been seeing and particularly in our industrial businesses for the last couple of quarters.

Back to the new products, could you give us a feel for how successful you are on the Valspar Plus paint for people with asthma and allergy? Do you see this growing substantially or is it just a small addition?

Well, it's a niche product and it's growing. Each week, it seems to get a bit stronger, but that's a niche product for us, Marie, at a very high price point for particular consumer segment.

And that is sold through Lowe's as well?

Yes.

And then, if I may, could you touch about your intention on debt repayment between now and the end of the year outside of the $200 million which you have raised the money for, and then stock repurchase between now and the end of the year as well?

Well, in terms of that debt repayment, you're correct. We would be paying down the bond that matures here in May.

And then from a share repurchase standpoint, we've commented on numerous calls that our intent is to get guarantee that we offset dilution. Longer-term intent is to reduce our share count 2% a year.

And we still have 7 million shares remaining under our authorization.

Lori, besides the $200 million, your cash flow generation is usually strong on an annualized basis and you just raised the $400 million. So any sort of paying down additional debts in that?

Well, the options for us in terms of what we do with that cash is to use it for internal growth initiatives, paying dividends which you could expect us to do. Acquisitions and share repurchases were both an option.

And then of course paying down debt, but the majority of our debt remaining would be commercial paper and it's at a relatively good rate. So we'll probably use our cash in other ways besides paying down debt.

It's Silke again. Of the $0.33 in restructuring charges of which most has been taken, what would be associated cost savings and how much have you gotten in the first quarter?

We haven't gone into any detail in terms of the savings other than to say that it's built into our guidance for the full year. And we still have summary structuring costs remaining that will flow in probably over the next couple of quarters.

So what percentage of your anticipated savings may have gotten in the first quarter?

I actually don't even know the number. It certainly has helped us from the overall gross margin improvement, as Gary mentioned earlier in the conversation that those initiatives are helping us.

Just on Europe, you mentioned that volumes were weak there. And I am just curious is that still confined to packaging coatings or is it spread to other product lines?

And also, for your 2012 outlook, you said you were still cautious on Europe. Do you think the situation in Europe has stabilized there or you're expecting further deterioration?

I'll only be speculating on the second part, James. On the first part, as I mentioned, we grew nicely in our coil coatings business in Europe despite the market weakness.

But our general industrial business was weaker than we would have liked, and our packaging businesses, et cetera, was a bit weak as well, particularly in beverage segment.

If I could ask additionally about your packaging business, is the majority of that coatings business for metal packaging?

It's virtually all of it.

And then what would be the approximate split of that business between aluminum beverage cans versus like steel food cans and so forth? Is it about 50-50?

The beverage segment would be larger for us than the food segment would be.

One of the major aluminum producers has 2012 forecast for beverage can packaging out there, and they're saying maybe 2% to 3% growth globally with notable growth in Europe and large growth in China. Does that match how you expect '12 to play out?

More or less, yes, I think that sounds right to me. I think China is growing double digits.

Latin America may grow double digits, I would think at least high single digits. And Europe and the U.S.

may remain weak. We'll just have to see how the year plays out.

So there is no reason for us to be concerned that maybe you're losing share in that business?

We are not losing share in that business.

Two things. The acquisition pipeline looks like these days you got a lot of money to spend.

Is there ample opportunities that are being pursued?

We're working on a few things, Saul, as we always are. But I'll say that there is nothing imminent.

Your Hi-DEF has now been out for a few years. It's been a great success.

That was sort of a high-end paint primer combo, so to speak. And now there has been some lower price competitive paint primer combination products introduced.

Your mainline is Valspar Ultra Premium. Do you have to move in the direction of a paint primer combination in a more popular price point as part of your strategy going forward?

Let me just say this. We're only six weeks away from the launch of our marketing for 2012.

So I respectfully decline to answer your question. You'll just have to wait and see what we're doing this year.

Hi, this is Abhi Rajendran recalling in for John. We're not too far away from hearing from the FDA on their thoughts on BPA.

Could you maybe just talk a little bit about your expectations in terms of their announcement and maybe just remind us of your BPA-free coating options that you have in your portfolio at the moment?

I don't know what they'll say except to probably reiterate their longstanding position that it's safe. That being said, consumers may request that can makers make a change.

And if they do that, we're fully prepared for that to happen with the technology that we have developed and commercialized in some cases and then on the shelf, so to speak, if we need to go in that direction.

If the DuPont Performance Coatings business came up for sale, would you be interested in any piece of the business or the whole business, because it seems there is powder coatings business and there is like a auto OEM and auto refinish business?

You're probably not going to participate in that. It's a little too big a bite for us.

And so they were in pieces of it that were to become available, sale of the whole division?

As I understand, it's the sale of a whole division. So any talk about pieces rather would be just speculation.

Thanks for joining our call this morning, everyone. To summarize, we're off to a good start to the year.

We see a number of challenges in our global markets, but we believe we can offset them with excellent execution and we raised our full year guidance to $2.92 to $3.12 per share. Thanks again for joining the call today and we look forward to updating you on our second quarter conference call in May.